Opportunities for Product Innovation

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• Opportunities for Product Innovation
• Maurice Cleaves
• Deutsche Bank
• Wholesale Solutions

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Agenda

• Market Dynamics
• Strategic Options
• An Alternative Banking Approach

3
Market Players - the need to act!
We have seen many noticeable developments in the
past few years.

• Encouraging Collaboration within the Banking
  Industry to develop SEPA
• Regulators continuing to press hard
• Unintended Consequences a very real possibility
• Continued investment will need to be paid back
• Emergence of alternative payment channels
• Rebalancing of volumes in different payment
  channels
• Closer linkage and collaboration between
  Corporate need and Bank provision

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Market Forces in the Payments Business
Expenses
Revenues

• High fixed costs of operation
• Ageing Legacy technology
• Labour intensive operations
• Operational risk
• Inflexible product
• Continuous Development
• Increased regulatory requirements

• Commoditised products
• Minimal Market Differentiation
• Increasing competition
• Pricing compression
• SEPA changing landscape
• Regulation Controlled Pricing
• Clients Seek value-add products

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Banks have two real options Market trends put
pressure on strategic positioning as insourcer or
outsourcer
While sharing or cost reduction initiatives might
look lucrative from a short-term perspective,
both options are unsustainable long-term.
Ultimately the decision for Banks in the
Transaction Banking business boils down to
insourcing vs. outsourcing
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Strategic OptionsPartnering can offer a viable
alternative and .
.create fuel for growth support the strategic
agenda provide scale, market ready products,
product innovation global reach
Customer A
Distribution Bank
Transaction Bank
ClearingDomestic/ACH Cross-Border etc.
Customer B
Distribution Bank
Transaction Bank
Customer C
Distribution Bank

• Break up traditional value chains
• Focus on core competencies
• Leverage existing resources and know-how to a
  mutual benefit
• Reach more efficient processing through
  consolidation of critical mass
• Provide access to more comprehensive product
  offering for customers across the region

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Resulting in the Emergence of New Business Models
Split between Distribution and Transaction Banks
Customer
Sales/Service
Distribution Bank
Transaction Bank
Customer
Sales/Service
Product Mgmt
Processing
Clearing
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An Alternative Approach A Wholesale Solutions
Product Suite

• Wholesale Solutions offers a Product Suite
  designed to meet requirements of clients from
  different segments. The whole suite of products
  can be placed in three categories with respect to
  the degree of solution integration

Integration Layer
File Connectivity
Partner Banking
Infrastructure Solutions
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An Alternative Approach State-of-the-Art
Payments Technology
MTNA
CINQ
PRISMA
SEPA
GMA
Messaging
Messaging
Customer
Customer
Processing and operations
Cheque Processing
Funds Transfer
Investigations

• 5 year vision investment program
• Systems designed built to include 3rd party
  partners
• White-labelled electronic banking solutions
• Scalable operations across the globe follow
  the sun
• Business Continuity Plans Systems
• Market leading customer service model internet
  tools
• Future-proofing payments environment
• Long-term Commitment to the business

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An Alternative Approach embedded with a modular
approach with open systems architecture
Interfacing / Communication
Infrastructure
Clearing
Bank to Bank Interfacing
Account Infrastructure (DDA)
Low Value Clearing
Liquidity Management (Cash Pool Engine)
Middleware Processing (Prisma)
Electronic Banking White-labelled (db-direct
internet)
High Value Payment Processing (MTNA)
High Value Clearing
SEPA Processing (SEPA Engine)
Global Messaging/ Customer Inquiry
Customer Service / Investigations (cinq)
Centralised Cheque Services
Bank-to-Bank Support, Governance and Training
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Market Players - the need to act!
Due to external and internal cost pressures, a
clear strategic direction is paramount.
Irrespective of our place in the processing
chain, we are all facing the same challenges!

• How much should we invest in systems?
• How do we get load on our systems?
• Where is our revenue growth?
• What new products can we develop?
• Local, regional or global?
• What are our core products?
• Outsourcing/insourcing is this an option and
  what for?
• Is a partnership an option? If so, who with?
• Exit aspects of the business?
• .and even, do we have a future in this
  business?

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Market Players - the need to act!

• There is an oversupply of banks and clearing
  mechanisms
• Only the fittest will survive whereby
  consolidation reduces competition
• The cost of infrastructure change is ultimately
  paid for by the investor
• The complexities of outsourcing should not be
  underestimated
• Count the cost of IT development
• New models will emerge

We need to pick our partners carefully .....do
they have a strategic vision, do they understand
our needs, are they committed to our
relationship and the business.
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Banks Need to Define Their Strategy

• What do you need to do to serve your customers?
• Do you need to serve all of your
• customer requirements?
• Do you need to produce this yourself
• or can you be a reseller?

Scope
Focus
Investment
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THANK YOU