Value under pressure
With financial institutions typically spending 70% of their IT budgets on legacy system maintenance,
innovation is frequently constrained. Financial institutions need agile technology models that support
business objectives no matter how unpredictable the future. Hewlett Packard’s Arie Ossewaarde explains
to Nigel Ash how the challenges of revenue growth, customer retention and acquisition, operational
efficiency, merger and acquisition integration, regulatory compliance, and risk management can be met.
 Banks spend far more on their IT than any
other industry, says HP’s vice-president
of financial services industry sales EMEA,
Arie Ossewaarde. On average they spend over
twice as much as a percentage of Opex and
almost twice as much per employee.
‘‘With the exponential rise in the volume
of information to be processed, the increasing
demands for compute-intensive risk calculations
and analytics, new channels including Internet
applications for services previously processed
via face-to-face or telephone contact, plus
ever-changing regulatory requirements, the
pressure on the cost of banking IT continues to
increase,’ he says.
That cost can however be mitigated
and even reduced by IT transformation.
Everything Hewlett Packard now does is
informed by its own achievement in driving
$1 billion a year out of its own IT spend,
down from some 4% of revenue in 2005 to
less than two percent in 2009.
Explains Ossewaarde: ‘HP’s own corporate
strategy is to support business growth
through wise capital management and
efficiency. Client feedback demonstrates
that financial institutions share the same
fundamental business priorities and objectives
as HP. We are applying best practices from
our own experience to the management
and transformation of our financial services
industry customers’ technology environments
to optimise business outcomes in the areas
of growth, cost efficiency and capital strategy.’
Through cost efficiencies, HP solutions are
designed to improve capital management and
free up resources so that they can be invested
in innovation for future growth.
‘Today, cost efficiency and capital
management are even more important as
a result of the recent financial crisis. Equally
risk mitigation is now core in the changing
regulatory landscape, with for example
tougher capital adequacy requirements,
regulators try to ensure that banks and
other financial institutions have sufficient
capital to keep them out of difficulty’.
HP is using its unique portfolio of
financial services industry solutions,
application transformation services,
converged infrastructure, and business
intelligence and information management
offerings to help financial institutions to
fundamentally restructure their technology
environments and business models for
sustained competitive advantage.
Global outlook
HP Banking Innovation Centres in Palo Alto
and Milan provide financial institutions with
the opportunity to develop strategies and
transformational solutions for overcoming
challenges and leveraging opportunities
in today’s competitive marketplace, and
help HP to align its unique portfolio of
technology, services and industry solutions
with customer business priorities. By working
in partnership with customers, HP has
gained the insight necessary to develop and
expand its range of powerful, award-winning
solutions, including Core Banking, Branch/
Channel Transformation, and Payments.
‘Financial institutions are increasingly
looking for end-to-end solutions and
are turning to services-led technology
partnerships, particularly outsourcing,’ says
Ossewaarde. ‘HP’s innovative industry
solutions incorporate flexible, tailored
sourcing strategies that embrace HP’s vision
for “Everything as a Service”.’
HP Enterprise Services offers a complete
portfolio of market-leading application, IT
and business process outsourcing, consulting,
business, and technology services that deliver
value to financial institutions around the globe.
The global team tailors these offerings to
meet the specific needs of individual financial
institutions, enabling them to respond to market
changes quickly and secure new opportunities
ahead of the competition. From initial concept
through to retirement and disposal, from adhoc
consultancy through to full outsourcing,
HP Enterprise Services professionals help
financial institutions manage and transform their
technology environments to deliver outcomes
that matter through expert knowledge, open
collaboration, and process leadership.
Mergers and acquisitions
For the banking sector, now in the midst of a
wave of unplanned consolidations, there are
major new pressures on CIO s to accomplish
systems’ consolidation and support the
expansion of business lines to retain newly
acquired bank customers. The attrition of
dissatisfied customers seems set to increase.
Banks must better understand and respond
to the needs of existing and prospective customers, then package and price products
and services accordingly.
HP’s innovative solutions provide
financial institutions with a real-time,
single view of the customer and their
business, and enable a consistent customer
experience across all channels.
‘The customer dynamic is changing.
Customers are far more fickle with
their services,’ explains Ossewaarde. ‘If it
doesn’t happen instantly, they move on to
a competitor. Price as well as speed and
quality of customer service are now key to
attracting and retaining customers.’
Customer focus
The upshot of the ongoing consolidation
of financial institutions and the maturing of
non-traditional competitors such as social
networking sites and Internet-only banks, is
that banks need to focus more than ever
on customer acquisition and retention by
enhancing total customer experience.
‘Customers will continue to migrate from
the branch, ATM, and call centre channels’
says Ossewaarde, ‘to other, newer options,
specifically online and mobile. To support this
migration, banks must evaluate investments
in channel strategy and technology, in some
cases divesting in one channel and reinvesting
the capital in another. HP’s market-leading
Branch/Channel Transformation, Core
Banking, Payments and Data Centre
Transformation solutions, all of which
enable improved total customer experience,
allow financial institutions to flip the typical
70/30 ratio between spend on system
maintenance and investment in innovation.’
In order to achieve this, HP is leveraging
its strengths in areas such as automation,
virtualisation and cloud computing
to provide cost-effective, converged
infrastructure that enables financial
institutions to make quick, accurate decisions;
innovate and bring new services to market
quickly; and flexes as demand fluctuates or
business and economic needs change.
The Payment Services Directive
Financial institution must adapt quickly to
not only a dynamic marketplace but also a
constantly changing regulatory landscape.
For instance, the Payment Services Directive
(PSD) became national law in all countries of
the EU and EEA on 1 November 2009. It has
introduced new requirements for payments
processing including improved customer realtime
information and reporting, confirmation of
charges prior to payments execution, reduced
float days and maximum value date execution
times, which will further reduce over time.
‘The PSD is not only having an influence
on procedures and back office functions, it
is also fundamentally impacting the rights
and obligations that financial institutions have
towards their clients,’ Ossewaarde says.
‘For many years, HP, together with its
partners, has been delivering solutions that
enable a bank to be compliant with the PSD.
Increasingly, financial institutions are looking
to outsource their payments processing.
HP Enterprise Services is one of the largest
payments processors in the world, offering card,
cheque, ATM, retail and wholesale processing
expertise and global delivery capability.
‘Just one example of our proven track
record,‘ says Ossewaarde, ‘is our 30+ years
of financial services industry and business
process outsourcing experience. Globally
we now administer approximately 68
million credit card accounts, three million
merchant accounts and process more than
6.6 billion transactions annually.’
The HP Financial Services Industry division
works with best-of-breed partners to
implement its solutions. However the most
important partnership, says Ossewaarde is
between HP and the customer.
‘One of the most abused terms
in a customer-vendor relationship is
“partnership”. Historically vendors
saw partnerships as a lock-in
of the customer to maximise
revenue while the customer
looked for a vendor as a partner
to maximise his discount and lower
his costs. This is not HP’s way. Every
engagement is different because the solution
from within the whole range of our capability,
including our innovative financing option, is
tailored to the specific circumstances and wishes
of each customer. It is a partnership in which
the client always leads for whatever contractual
period that is desired.’ |
