Overcoming the Challenges of Modernizing Core Banking Systems

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Overcoming the Challenges of Modernizing Core
Banking Systems
Banking Vietnam, an IDG event
Anselm De Souza Vice-President, Asia Pacific
Sales System Access Limited, Singapore 17-19th
May 2006, Melia, Hanoi, Vietnam
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Agenda

• Introduction
• Key Questions
• Why Change
• Selection Criteria
• Overcoming the challenges
• Key Success Factors
• Case Study the Vietnam International Bank

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Introduction
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Key Questions

• Why were Vietnamese banks taking extended period
  to roll-out their core systems
• What were/are the challenges Vietnamese Banks
  faced when modernizing core systems?
• Is this situation specific to Vietnam?
• How can we do it better?

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Questions to ask

• Should we change? Why?
• How do we choose? What are the criteria?
• How do we prepare for change?

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Should we change? Why?
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Vietnam Banking EnvironmentOverview
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Vietnamese Banking Environment - Overview

• Vietnam economy grew 8.4 in 2005
• States 10-year Development Plan for the Banking
  Industry
• Adopt international banking and business best
  practices
• Better corporate governance
• Market-based monetary management
• Modernization of common systems
• Promote Public Trust in the banking system

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Vietnamese Banking Environment - Overview

• The World Banks initiative to modernize the
  Vietnam Banking Industry
• Vietnam is still largely unbanked
• 45 of money in cash
• gt50 of local business transactions done outside
  the banking system
• Only 1.3 Million Bank Accounts

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Rationale for Acquiring New Core Banking Systems
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Rationale for Replacement of Legacy CBS

• Entry of foreign competition
• Increase Customer Sophistication
• Adoption of international best practices
• Delivery of international banking products
• Faster go to market
• More stringent regulatory requirements

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Rationale for Replacement of Legacy CBS

• Time is of the Essence!

Opportunities for growth in the banking sector
are so big that local speculation in banking
shares is running hot and heavy here on
expectations that big foreign banks will buy into
smaller local state-owned commercial banks toward
the end of the year. -- Asia Times Online,
April 19, 2006
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Costs
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Benefits
Sample
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Costs -Benefits
Sample
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How do we choose? Criteria for Selection of Core
Banking Solutions
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Selection Criteria

• Product Functionalities
• Technology Architecture
• Implementation Track Records
• Local Support Vendors Commitment
• Price

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Selection Criteria

• Product Functionalities
• Sufficient Functionality Coverage
• Technology Architecture
• Scalability
• Flexibility
• Ease of Integration
• Interoperability with existing systems
• Security

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Selection Criteria

• Implementation Track Record
• Global expertise and domain knowledge
• Local project implementation experience

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Selection Criteria

• Local Support Vendors Commitment
• Tried and tested post-implementation support
  strategy
• Local Product Support
• Local Office

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Selection Criteria

• Price
• Minimal Customizations on International CBS
  product
• Short Implementation Time

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Multi-dimensional criteria for SW package
evaluation selection
Functionality

• Transaction Management
• Information Management
• Risk Management
• Etc

Technology

• Support of presentation layer
• Support of Databases
• Support of Middleware
• Support of Operating Systems
• Support of Hardware
• Toolset to facilitate implementation

Total Cost of ownership

• Cost of Software
• Cost of Hardware
• Consulting Cost
• Cost of Integration

Evaluation Criteria
Implementation and support

• Pre-configured Solution
• Supportability
• Availability of implementation and support
  consultants
• User Training
• Ease of Use
• Support for multiple languages
• Interface with desktop tools

Architecture

• Maturity
• Reliability
• Scalability
• Integration with other systems

Vendor viability

• Financial Viability
• Number of implementation sites
• Industry Reference
• Years of existence
• Commitment to technology and retail industry

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evaluation and summary of findings
Functionality
ILLUSTRATIVE
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Technology
Total Cost of ownership
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• Numeric Scoring Methodology
• A Mathematical Model based on the evaluation
  criteria
• A weightage is given to each criteria
• A Balanced Score is computed

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10
10
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4
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2
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Package 1
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Package 2
2
2

Package 3
2
Package 4
4
2
2
6
4
4
8
6
6
10
8
8
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Architecture
Implementation and support
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Vendor viability
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How to over come these challenges?
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Challenges

• To reduce evaluation process more time to
  implement
• To implement clear objective evaluation scoring
  system
• Look beyond the typical focus
• Product Fit
• Technical
• Functional
• Project
• Timeline
• Price

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Note on Pricing
Project delays are very costly. The opportunity
costs of any delays usually erode any benefits of
the initially competitive financial proposition
and more. -- Mr. Trinh Van Tuan, VIB
Chairman
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Key success factors

• Internal Commitment
• Top down support
• Adequate Resourcing
• 20-30 staff typically involved in project
  implementation whilst managing day to day
  activities
• Strategic HR changes
• Talent spotting
• Change management
• Redesigning jobs roles
• Business Process Re-engineering

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Key success factors

• Vendor management
• Management commitment
• Adequate resourcing project management
• Partner strategy (one team, one goal)
• Bank staff Vendor integration
• Culture and language

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Case Study Vietnam International Bank
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About VIB

• Vietnam International Bank (VIB)
• Started in September 18, 1996 with an initial
  paid-up capital of 50 billion VNDs
• At the beginning of 2005, chartered capital had
  amounted to 325 billion VNDs
• 5th Largest Joint Stock Bank in Vietnam
• Goal to achieve very challenging growth targets
  for the next 10 years

Our bank has set out a plan to expand the
current branch network of 34 branches, grow total
assets, grow the number of customers, and widen
range of products and services. This plan will
ensure VIB attains a balanced portfolio of assets
to strengthen the banks financial stability, a
diversified sources of income as it achieves its
growth targets. -- Mr. Trinh Van
Tuan, VIB Chairman
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The Major Objectives

• Rigid Short Implementation Time Frame
• Big Bang, simultaneous Live sites

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VIB Selection Criteria

• Legacy Core Banking System
• Aging technology that cannot sustain growth
• VIBs Stringent Selection Criteria
• Rich Functionality and Flexibility
• Robust Technical Specifications
• Operational Compatibility
• Technical Scalability
• Professional Service Standards and Management
  Support

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Other Key Issues Faced

• Partner Issues
• Choosing the right solutions partner
• Language and cultural barriers
• Coordinating Team members separated
  geographically

• Product Issues
• Support international banking product offering
  and also local practices and processes
• Local language support
• Rapid implementation

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How the eventual vendor was chosen

• Selected from among several international banking
  vendors including the Top 5 global solution
  providers
• Track record of successful project delivery
  On-Time and On-Budget.
• Domain Knowledge and Understanding of VIBs
  business

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What VIB looked for in a partner
We are a bank, and project delays are very
costly. The opportunity costs of any delays
usually erode any benefits of the initially
competitive financial proposition and more. We
want a partner who will deliver on their promise.
After thorough reference checks and site visits,
the VIB team found that customers of System
Access spoke highly of the companys immense
desire to work closely with the bank and deliver
in the given timeline. -- Mr. Trinh
Van Tuan, VIB Chairman
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Project Approach

• Both parties agreed on Bank in a box Approach
• Vietnamese Localizations
• Minimal Customization
• International best practices business process
• Thorough training (knowledge transfer)
• Introduction of Factory Acceptance Test
• Full onsite support

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How Partner rose to the occasion

• Domain knowledge and Expertise to provide a
  Localized International CBS product
• Flexibility of the product that is a readily
  customizable international product suitable for
  Vietnam banks
• Complete understanding of the issues and
  challenges that arose
• Hurdled the cultural and language barriers
• Solid Project management

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Successful Live Operations!

• On 14th April 2006, SYMBOLS went LIVE at VIB.
• In only 10 months, VIB is now serving
• More than 70,000 customers
• Network of 34 branches, and
• Covering more than 2000 KM throughout Vietnam
  using SYMBOLS CBS.
• VIB is now set to Expand and Acquire an even
  Bigger Domestic Customer Market share.
• VIB is now ready to compete aggressively against
  bigger foreign banks when they enter Vietnam.

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About Speaker
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Anselm de Souza

• Vice President, Sales Asia Pacific
• 22 working experience in Financial Services
  Industry
• Senior Regional Positions in
• Callatay Wouters (Core Private banking)
• CashTech (Cash management)
• S1 (E-Banking solutions)
• FICS (Corporate Banking Solutions)
• Dow Jones
• Marshalls Money Brokers

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System Access At A Glance

• Incorporated in 1983 Focus on Banking Software
  Development Implementation
• 300 staff across 13 Regional Offices in Bangkok,
  Beijing, Shanghai, Hanoi, Tokyo, Kuala
  Lumpur(x2), Bangladesh, Bratislava, Dubai,
  Manila, Prague, and Karachi
• 150 banks in more than 25 countries across Asia
  Pacific, Middle East, Africa and Europe.
• Major Shareholders Management, IDA, Warburg
  Pincus Private Investors
• Listed in the Singapore Stock Exchange

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