NelsonHall: Banking Operations & Transformation blog feed NelsonHall's Banking Operations & Transformation Program is designed for organizations considering, or actively engaged in, the outsourcing of banking industry-specific processes such as payments, loans, or securities processing. <![CDATA[Keys to Success for Banking ESG Programs]]>


Environmental, Social, and Corporate Governance (ESG) is a popular topic of conversation and one that most corporations claim to be actively pursuing. The financial industry is particularly active in ESG, and here I look briefly at what is being done to support ESG initiatives by IT services and BPS vendors who support financial institutions’ operations. 

How vendors help banks set up & run ESG activities

Vendors are supporting banks with services including:

  • Advisory: engagements to develop a strategy, roadmap, and framework for implementing effective ESG programs
  • Solutions: implementing tools, software, and ecosystems to achieve goals 
  • Integration of ESG/business activities: coordinating and embedding ESG programs into ongoing business activities.  

These services are applied to:

  • Data: managing, analyzing, and reporting current state and the impacts programs have made  
  • Technology: identifying and implementing technology to achieve ESG goals (e.g., technology to reduce energy consumption)
  • Culture: working with stakeholders to educate and impact behaviors
  • Portfolio management: orchestrating and managing ESG programs and assets across the enterprise to reuse and pursue improved outcomes.

Key activities covered include:

  • Literature review and best practices
  • Analysis: analysis of activities to prioritize for change, plus analysis of outcomes achieved  
  • Reporting to stakeholders, including employees, customers, management, and regulators  
  • Tracking the chain of custody and activities for assets and processes to confirm that actual behaviors are as reported
  • Employee training: educating employees about strategies, value, and methodologies of ESG activities.  

Most vendors offer a wide range of services, but specialize in implementing a few processes (e.g., decarbonization or HR).  Activities with a high level of adoption include:

  • Decarbonizing operations
  • Supply chain tracking for carbon and ethicality
  • Reporting (especially for regulations)
  • Employee management, ethicality, and diversity.

In terms of challenges, ESG programs have faced pushback for ‘greenwashing’ activities where analysis of achievements has indicated actual outcomes have been much lower than reported, or non-existent. The key to achieving successful, repeatable outcomes is rigorous: 

  • Tracking of activities and assets with robust chain-of-custody controls  
  • Compliance with auditable procedures to ensure activities are as reported   
  • Stakeholder training with buy-in from trainees (achieving cooperation).   

Example vendor frameworks & solutions for ESG

Decarbonization: Atos

Atos delivers services to help clients decarbonize their operations. Their offering helps clients to identify their current digital emissions status, build a roadmap to reduce the carbon footprint, and engage employees to support these changes. Key components of the offering include:

  • One-day ‘hackathon’ to identify issues and build consensus
  • Assessment: identify the current state and build a roadmap to a desired future state
  • Dashboard: displays information on the current status and supports setting goals and decision making
  • SLAs: Atos contractually commits to carbon reduction targets with a roadmap for how those targets will be met
  • Green App: a gamified ecosystem to help employees understand key issues and support developing ideas to solve problems.

Employee & stakeholder training: Infosys  

Infosys delivers training services to educate employees in adopting ESG practices across the enterprise. The key to enhancing the training programs that the vendor delivers to clients is the use of existing CX platforms to enhance training effectiveness using tools such as design thinking, knowledge management, and digitally delivered learning offerings. Key to success is special-purpose platforms that respond to environmental change and support change in the enterprise, including:  

  • Wingspan platform: knowledge and change management  
  • Meridian platform: sustainability events and community.

Responsible supply chain: WNS   

WNS supports clients looking to secure and improve the ESG and operational characteristics of their supply chain with a set of agreements, contracts, practices, and due diligence. Key components of its responsible sourcing offering include supplier:

  • Code of conduct: mandatory standards for all participants
  • Portal: supplier data repository
  • Due diligence
  • Contracts: standardization of party obligations, including to ESG
  • Evaluation: a periodic review of competency and compliance
  • Assurance: supplier self-evaluation
  • Awareness: mandatory anti-bribery training
  • Diversity: profiling of suppliers
  • Governance: audit and management reporting
  • Ongoing improvement: benchmarking and ongoing enhancements.

In summary

Vendors are launching tools and offerings to address ESG challenges rigorously for banking clients and others. The programs are effective where there is accountability, consensus, ongoing improvement, and vendor skin in the game. Effective ESG programs will become increasingly important to the heavily regulated banking industry over time.

In my next blog I will look at how the market for these services, including client demand, is evolving.   

<![CDATA[WNS: Helping B2C Digital Startup Banks to Scale Rapidly]]>


Digital startup banks are built on FinTech functionality to deliver financial services in an omnichannel environment. There are two types of FinTechs: B2B businesses that have a proprietary platform to deliver service to clients, and B2C businesses that provide clients with an all-digital banking experience.

WNS: expanded focus on B2C FinTechs

While WNS supports B2B and B2C, it has seen more traction in the latter, and has expanded its services to support the B2C FinTechs. The key market segments include:

  • Digital banks
  • Personal finance
  • Wealth managers
  • Business finance (small businesses)
  • Payment providers/digital wallets/crypto firms.

Because the B2C FinTechs work with consumers, they require support for compliance and customer support, and these processes require human interaction to succeed and grow. Only 10% of FinTechs survive, but successful firms require massive scaling to meet customer service requirements. The good news is digital banks have lower exception rates (typically a 3% exception rate, versus 10% from a typical tier one bank) because their core processes are all digital.     

However, many of these startup digital banks have faced operational challenges. Traditional banks are retaining customers because they offer the entire range of banking services, at scale, which encourages customers to maintain their business with them. FinTech banks that have faced challenges include Tesco Bank which has sold off its mortgage business and is closing its clients' demand-deposit accounts. Similarly, M&S Bank, a JV of M&S Stores and HSBC, has closed its in-store branches and is also closing its customers’ demand-deposit accounts. The lesson is that full product-line operational delivery at scale economics is critical to success.

WNS services for startup FinTechs

WNS has pursued the startup B2C FinTech market with a three-pronged set of services:

  • Speed to startup:
    • Map regulatory requirements
    • Identify volume and staffing requirements
    • Establish controls and SOPs
    • Establish risk management, compliance, and control frameworks
  • Scaling growth for individual processes:
    • Institutionalize best practices
    • Scale staffing to match business potential
    • Performance management
    • Automate repetitive manual processes (e.g., exception management)
  • Scaling growth across multiple processes and improving the customer journey:
    • Scale multi-geography operations
    • Incorporate new regulatory and process requirements into frameworks
    • Implement IA, AI, and omnichannel CX.

WNS engagements with FinTechs add processes over time, and the typical progression of services includes:

  • KYC/AML/Fraud and compliance: most engagements start with this set of processes
  • CX and onboarding: engagements next add in compliant onboarding services to achieve higher conversion rates, faster overall growth rates, and improved CSAT
  • Back office services: reporting, accounting, fulfillment.

WNS can enhance its clients’ capabilities with functionality from its own set of tools or its ecosystem of FinTech solution providers which delivers emerging functionality in four key areas:

  • Customer service
  • Origination and servicing
  • Analytics
  • Compliance.

By using this rollout strategy and set of offerings, WNS has been able to scale individual engagements by 2X to 10X in one year. Overall, WNS has been able to grow its digital startup bank business this past twelve months by 40% y/y. Clients using these services have experienced a 30% reduction in TAT, 95% improvement in CX, and 30% reduction in application processing times.


Digital startup financial institutions are looking to bring new business models to market quickly. Third-party services vendors need to provide STP and a comprehensive set of services to support these emerging BFS services providers. WNS has built a set of operational services which enable startup banks to scale fast and continuously deliver new functionality to customers. This enables digital startups to attract and retain customers by delivering differentiated value. In contrast, tier one banks look for vendors to deliver siloed functionality.

Startup banks need a vendor that can deliver broad operational support. Sourcing, organizing, and managing resources is a complex challenge for a bank. WNS has pulled together the relevant components and frameworks necessary to deliver a full-service operations environment. As startup banks and local banks look to grow their businesses, they will increasingly rely on third-party vendors for this type of support.  

<![CDATA[Infosys’ Toolbox to Accelerate Banks’ Enterprise Journeys to the Cloud]]>


Banks are accelerating their move to the cloud to respond to the pandemic, enable greater operational agility to reduce time to market, and develop open banking capabilities. At the same time, performance dispersion (the operational variance across institutions within the industry) has increased significantly.

Cloud delivery can change operational performance and hyperscale businesses. So, how can banks move their operations to the cloud most effectively, and what tools and frameworks are needed to best adapt cloud operations over time? Infosys has developed a set of tools and frameworks, Cobalt, to address these challenges.

Infosys’ Cobalt Offering

Cobalt, Infosys’ cloud framework offering, is designed to address the key challenges enterprises face when trying to move their operations to the cloud. These challenges include:

  • Security: the ubiquitous challenge of the cloud is providing satisfactory cybersecurity   
  • Modernizing and innovating their platforms: enterprises are moving to the cloud to modernize their platforms, but access to a broad range of tools and applications in this rapidly emerging market remains a challenge. Maintaining flexibility requires enterprises to avoid vendor lock-in
  • Improving speed to market: implementing new solutions quickly and effectively in a multi-cloud environment is subject to wide variation across domains and companies. Access to talent continues to be a gating factor.  

The Cobalt offering provides a solution across these five key areas of accelerated cloud adoption by any enterprise:

  • Mainframe modernization: tools for assessment, rules extraction, and component migration 
  • Cloud-native development: tools for the development of cloud-native apps
  • Database migration: database migration frameworks and tools
  • Migration: frameworks and tools for migrating apps to the cloud
  • DevOps: tools and frameworks to accelerate the adoption of DevOps across the bank.

Infosys believes cloud migration requires industry-specific IP to fully take advantage of the cloud’s benefits. Infosys has created a financial services-specific Cobalt offering, FS.Live.Cloud, that includes, but is not limited to:

  • Open Banking solution: an open banking API platform
  • Recon-in-a-box: recon platform to manage operational risk and provide controls
  • Mortgage-as-a-service
  • Business banking: Virtual CFO
  • Media platform: digital asset and content management
  • Voice-based solution: voice-based solutions integrated into Alexa
  • Location-based solution: enhanced CX with value-added services based on location.

This packaged version of FS.Cloud.Live helps mid-size financial institutions with a cloud solution at an overall cost of 15% to 18% lower than buying public cloud services direct. In addition to the services described above, this offering will:

  • Host applications from Infosys and third parties (e.g., Actimize, Calypso, Avaloq, and Fiserv)
  • Provide clients with the ability to build new cloud-native platforms using accelerators for cloud-native development.

Large financial institutions in most cases have either developed or are developing a comprehensive cloud strategy and they can benefit from leveraging components of FS.Cloud.Live to optimize migration times by 30-40% and deliver a much lower overall TCO.  


Financial institutions of all types are looking to migrate to the cloud with the help of third-party services and technology vendors. Sourcing, organizing, and managing resources is a complex challenge for any financial institution. Infosys has pulled together the relevant components and frameworks necessary to deliver a cloud migration project, with ongoing environment management updates, to enable regional and local banks to capitalize on the cloud opportunity. These services are useable by line-of-business executives, not just technologists, which allows the LOB to directly adapt the capabilities to align with their business objectives.   

As banks migrate more of their operational footprint to a multi-cloud environment, the technology will become more robust. However, the business advantage comes from being an early mover. All financial institutions are looking for the broadest, most robust set of tools, technological and human, to enable them to transform their business models for a more agile, open banking industry. The FS.Cloud.Live platform is a good example of the type of tools banks need to start their cloud journey.

<![CDATA[Capgemini’s Framework for Digital Transformation in the Financial Sector]]>


The pandemic has accelerated the adoption of digital transformation across all industries, and in the financial sector, operational transformation has grabbed the top spot in the priority list for investment and spending. At the same time, performance dispersion (the variance across institutions within the industry) has significantly increased.

So, how can banks make their transformation initiatives effective, and what drives performance? Multiple firms, banks, and IT/operations services vendors, are now creating digital transformation frameworks to help improve the effectiveness of these efforts.

Capgemini’s TechnoVision framework

Capgemini has created its own transformation framework, TechnoVision, which identifies key business/technology levers, evaluates technologies, enables initiative prioritization, and supports disciplined creation and execution of a transformation strategy.

Strategic considerations are based on three core principles, backed by technology domains, which are:

  • Standards: each technology, and the domain it is applied in, requires customized standards which are set by the ecosystem it operates in
  • Data: sourcing, scrubbing, analyzing, and using data in businesses
  • Security: security practices relevant to the specific operational environment.  

Technology domains under consideration are Cloud, AI, Immersive, Connected, High Performance & Decentralized Technologies. The operational framework is adapted to each industry where it is employed. TechnoVision has the following key components:

  • Infrastructure areas for transformation:
    • Invisible infostructure: coordination of the technology infrastructure  
    • Applications unleashed: the application and API domain  
    • Thriving on data: the data and AI domain
    • Process on the fly: the process automation domain  
  • People-focused areas:
    • You experience: stakeholder experience domain  
    • We collaborate: workforce and partner coordination  
  • The design principles for transforming delivery technology. Here, the principle of balance by design aims to balance and coordinate people and systems to create sustainable delivery.

The framework allows banks to move from a centrally controlled organization (hub and spoke model) to a decentralized model, coordinated by a set of operational/business standards and a single golden-source set of data. The value of the framework is that it can deliver:

  • Growth: driven by hyper scaling in two directions: matching costs/revenues, and the ability to harvest smaller economic opportunities more efficiently
  • Efficiency: driven by lower error rates, reduced reconciliation/fixes, improved STP/fulfillment, and lower cost
  • Stakeholder engagement: driven by higher CSAT, improved CX, higher up/cross-sell
  • Resiliency (losses previously to generational change, silos, and latency responses to societal changes)  


Financial institutions of a wide variety of backgrounds and characteristics are looking to undertake digital transformation with third-party services and technology vendors. There needs to be a meeting of the minds among all stakeholders to ensure the transformation process is effective. A transformation framework helps to establish and communicate a common set of goals, understandings, and roadmaps across stakeholders.

Capgemini’s TechnoVision framework for financial services helps banks address transformation issues across the enterprise, including standards, data, and security. The framework has been used in many global and regional banks to define and accelerate the transformation journey. Other services vendors have similar frameworks, though TechnoVision is distinctive in its use of sessions with local banking executives to create localized banking roadmaps which are not reliant on a hub and spoke digitalization architecture. We expect to see Capgemini build more real-time transaction capabilities with its clients to address banking’s move away from wide settlement windows and batch processing.

<![CDATA[Intelligent Automation Driving Profound Changes in Financial Services]]>


NelsonHall recently published a market assessment and forecast report on Intelligent Automation in Banking: Transforming Operations. We found that financial institutions must automate their operations if they are to compete successfully in a rapidly evolving marketplace. Currently, they operate with manual processes using a heterogeneous set of platforms, acquired over many years of M&A. However, the pace of industry change is increasing, while labor-based operations are slowing financial institutions’ abilities to respond. Cognitive, AI and RPA technologies are allowing these institutions to become more agile, cutting the cord from labor-based value-add, without having to do a rip-and-replace of their existing platforms.

The state of IA in financial services

For the past year, financial institutions have been:

  • Expanding the use of process discovery to identify new targets
  • Standardizing processes across silos  
  • Focusing on the use of IA for employees for WFH and fieldwork (especially in response to COVID-19)
  • Accelerating their delivery from the cloud   
  • Adopting the use of hybrid AI/RPA to support agents and advisors.

Over the next year, financial institutions will focus on:

  • Managing data across silos and markets
  • Using agile techniques to deploy new functionality with DevOps and Lo/No code solutions
  • Increasing their focus on human/bot teams and their effectiveness
  • Applying IA to low-volume manual processes.

However, the external environment has put up barriers to transformation. The key barriers impeding the efforts of financial institutions include:

  • Access to emerging technology: all IA services vendors are building ecosystems for emerging technologies and acquiring staff skilled in relevant technologies. Finding the best new technologies and embedding them in effective platforms remains difficult     
  • Access to qualified staff: changing technologies changes the required mix of staff skills, and emerging tech is driving a skills shortage. Currently, AI is the most constrained capability  
  • Changing regulations requiring resources to adapt to them
  • The COVID-19 induced move to more distributed operations:
    • The need to reduce supply chain risk by increasing the distribution of operations 
    • Increased use of joint human/bot work teams, and how to make them effective
    • Shifting delivery to the omnichannel environment and rearchitecting processes   
  • Changing business models: the advent of digital banks (e.g., Marcus) and the need to create new competitive business models to address this challenge.

Rising to the challenge

To address these challenges successfully, financial institutions need to focus on two activities: vendor selection and execution.

Key factors in vendor selection include:

  • Preferred product vendors should have the widest pool of IT services providers supporting them
  • Focus on services vendors with skills in process discovery, breadth of solution partnerships, willingness to invest in operations, AI, domain knowledge, and data management capabilities  
  • Building an ecosystem of vendors with knowledge of client’s business issues; complementary skills to build and deliver IA services;, and the ability to work within client operational practices
  • Changing the operational model: banks need to shift from operational leverage (scale economies) to leveraging flexibility (ability to cost-effectively switch out workloads).

Key factors in execution include:

  • Preferred vendors should have the widest pool of solution providers supporting them
  • Redefining what is delivered by third parties, internal, and cloud to maximize flexibility and speed new intelligence and automation 
  • Focusing on increasing the yield of use cases by focusing on KPIs for successful use cases 
  • Transforming application development to a DevOps model to speed the innovation cycle.

In summary, financial institutions are changing their goals in two important ways:

  • From improving process efficiency to improving data management
  • From improving cost efficiency for static businesses to agility for continuously changing businesses.

The operational changes being made will drive business model change. And these operational changes will drive accelerating change in banks’ product offerings, customer base, and market presence. 


Find out more about NelsonHall’s Intelligent Automation in Banking: Transforming Operations market assessment and forecast report here or contact Guy Saunders.

<![CDATA[3 Key Growth Segments for Banking ITS & BPS in 2021]]>


Banks will spend 2021 pursuing different aspects of three key initiatives that have become more important since the advent of COVID-19. The first is process automation, which has become more important but needs to increase its delivery effectiveness.  The second, work-from-home (WFH) has also accelerated under COVID-19 but will need to change in 2021 to continue to be effective. The third is the application of cognitive to processing. Cognitive is an immature technology and has had teething pains with bias and ethics. Users of cognitive technologies will need to include controls to meet ethics requirements that society requires of its business community.  

Process Automation

Process automation has been an accelerating trend for the past four years. Since COVID-19 struck earlier this year, the adoption rate of automation has pulled three years of anticipated adoption work into the second half of 2020. However, this acceleration has highlighted key challenges to effectiveness. They are:

  • Process discovery: the acceleration in the pace of adoption has highlighted that banks do not fully understand the processes and process bottlenecks that need automation. Multiple vendors have been developing enhanced process discovery tools to increase the speed at which banks can identify processes   
  • Use case yield: most banks have been toying with many POCs to try to improve process effectiveness. However, the majority of cases (sometimes as high as 90%) fail to meet their required rate of return to justify their deployment. Third-party vendors are well-positioned to improve the yield on POCs due to their work with multiple clients in many industries. Increased rigor of use case development, based on experiences to date, will enable higher throughput from conception to operations 
  • Orchestration: once the bots are deployed, especially in a highly distributed environment such as cloud or multi-country, effectiveness declines rapidly. Orchestration tools are being built and improved to improve effectiveness.

These issues have become a priority for banks. Our conversations with bank executives indicate their highest priorities for RPA engagements are:

  • Increasing the yield to operational deployment from POCs and use cases
  • Maintaining the effectiveness of bot deployments while adapting the operational environment to changing business conditions.

In 2021, they will focus their automation initiatives on compliance (especially the conversion of loan contracts to a post-LIBOR world), customer service, improving agent effectiveness, and KYC/AML reviews.

Work from Home

The COVID-19 world has seen a mass migration to WFH. However, CEOs and other leaders are concerned about workforce morale and training issues over the long term. Bankers we have spoken to expect WFH will remain a larger part of the financial services environment, but much smaller than it is today. Specifically, interviews we have conducted indicate banks expect 70% of workers to move back to offices and ~30% to remain in a WFH environment. Over the next year, institutions will have to work out what the shape of the new workforce deployment will be. Key issues will include:

  • Which workers will be on-premise and which in a WFH environment?
  • What are the criteria for working in each environment?
  • What are the conditions and frequency of being on-campus or off-campus?
  • How will this impact the shape of teams?
  • What automation and security will be required to support workers over the long term in this new environment?

Until the lockdowns end there will not be much movement on this issue. However, the second half of the year should see the economy open up and these issues will take center stage.  

Cognitive Processing Support

Banks and technology vendors have been developing and trialing cognitive support tools for many years now. The aggressive move to digital channel environments caused by COVID-19 has both enabled the application of cognitive tools to business processes and necessitated the use of cognitive tools to deliver services. However, accelerated deployment of cognitive tools has highlighted challenges including:

  • Bias: ML and AI tools are inherently backward-looking. Improving society or reducing inequities will not happen from a backward-looking analysis. The algorithms, use cases, and human oversight of these tools will be overhauled in the upcoming year
  • Compliance: to date, the primary use of cognitive has been within an individual market and silo at a bank. Moving into 2021, banks are looking to deploy cognitive across silos and markets. Understanding data from across heterogeneous environments is a big challenge, but regulators are requiring banks to deliver on this. 

The above growth areas of technology services for banks in 2021 are the result of 2020’s rapid deployment of immature technologies. Each of the three growth segments of services will, as usage matures, provide banks with increased agility to adapt to a rapidly changing business environment.

<![CDATA[How Capgemini is Targeting Improved Wealth Advisory Services]]>


It has been extensively reported that industries requiring in-person interaction, such as travel and entertainment, have been adversely impacted by the COVID-19 pandemic. Less obvious has been the impact on industries that are often typified by remote delivery. For example, the wealth and asset management industry is primarily driven by the long-term buildup of wealth and involves infrequent face-to-face meetings.

During 2020, global stock markets have recovered from the March stock market decline (but maybe relapsing in late 2020) when COVID-19 became a household word and businesses were forced to respond. However, despite its advantages, the wealth management industry is still facing strong headwinds from COVID-19 impacts. Overall, industry Q3 results for wealth management businesses have shown strong revenue performance based on strong market appreciation, but not from new business. To maintain operational strength, wealth managers will need to attract new customers and assets to perform well when future market breaks occur.

Three emerging trends can help wealth managers to grow their revenues and control their costs. These trends include:

  • An emerging younger customer demographic which prefers very different methods of interaction (primarily digital and mobile interactions)
  • Open banking ecosystem of vendors providing products for improved CX and a broader product mix
  • Mass affluent offerings of existing product types and, in the future, increased customization of offerings for each customer (hyper-personalization). 

Many financial institutions and services vendors are grappling with ways to enhance the customer experience in partnership with human advisors. Improving the coordination of interaction between advisors and customers is a complex, highly human, challenge that firms are beginning to address. For example, Capgemini has developed its Augmented Advisor Intelligence solution to support matching the right investment advisors to individual customers by analyzing and then leverage the advisors’ traits including:

  • Prospecting and compatibility scoring
  • Propensity modeling
  • Next-best action decisions
  • Value-based segmentation
  • Model financial advisor
  • Best practice behavior.

By drawing on internal data (advisor past customer interactions and portfolio) and external data (customer demographics, sentiment, portfolio, and behaviors) the platform uses ML and AI to provide advisor matching recommendations, investment and portfolio recommendations, and best practice recommendations.  

The benefits for the wealth management firm include:

  • Ability to assign advisors to customers based on fact-based analysis of personality, behavior, and lifestyle matching
  • Ability to track and monitor advisor performance, including prescriptive analysis of problems that may be developing
  • Improved targeting of outreach and customized offerings to customers, which can increase marketing campaign ROI
  • Improved ongoing advisor/customer interaction by use of sentiment analysis of digital communications and improved routing allocation and recommendation options. 

The application of this platform across markets has resulted in distinctly different regional requirements, including:

  • Mature markets: young people are the primary growing demographic. The focus is on developing omnichannel access to digital-based investment services for customers familiar with wealth management activities but dissatisfied with traditional delivery methods  
  • Emerging markets: small business owners, often middle-aged are the primary demographic. The focus is on supporting investment into growing their businesses
  • Mature Asian markets: rising young professionals are the primary demographic. The focus is on developing a set of mass affluent products that can grow in value to service the lifetime financial needs of individuals with limited or no family experience with financial products.

In short, vendors are trying to move beyond tracking and analyzing customer traits and propensities, to analyzing and changing advisor/customer interactions to optimize CSAT and business effectiveness. Enhancing human interaction will allow financial institutions to sell into a “market-of-one” effectively. These tools will enable consistent success in matching advisors to customers and reduce the cost of delivery to enable greater adoption of mass affluent wealth management offerings in all marketplaces.

Capgemini’s approach to enhancing advisor/customer interactions and relationship management provides a comprehensive approach to this challenge. It identifies stakeholder attributes, predicts behaviors, manages ongoing interactions, and evaluates ongoing relationship health. Most intelligent solutions focus on improving transactions. This type of platform enhances customer lifecycle management performance by improving communication and understanding between human beings. 

<![CDATA[Banks Accelerate Efforts to Digitalize Operations to Deliver Customized Experiences]]>


I recently participated in a webinar panel during the Consumer Banking Association conference with Genpact and TD Bank. The panel topic was Genpact: Turning Crisis into Opportunity for Consumer Banking, and it addressed three core topics:

  • The global health and economic crises have reshaped consumer banking
  • Banks are adjusting to serve customers digitally while trying to maintain empathy and human connection
  • Banks can accelerate and prioritize their digital investments to drive real change.

The COVID-19 crisis has accelerated previous trends towards digital adoption, including:

  • Cloud migration, as banks have moved from a single cloud strategy to a hybrid, multi-cloud strategy
  • Omnichannel migration, as banks close branches and expand online alternatives
  • Cybersecurity adoption, as banks seek to secure their data and operations in the cloud.

TD Bank has found that banks have moved at light speed to implement the PPP Act and financial relief offers for customers. TD Bank’s relief offer, TD Cares, was built with three concepts in mind:

  • What benefits do stressed customers need?
  • What products can best deliver these benefits?
  • Outreach to customers the bank anticipated might need support. The guiding principle is meeting the customer where they are (online, in-person, etc.).

The delivery of these services was developed with a “digital-first” approach, followed immediately with human interaction to support robust interaction and CSAT.

Overall, banks are trying to prioritize where they will be spending their money. When a bank looks at digitizing a process, such as onboarding or payments, where in the value chain should it start and focus their investment dollars to make the largest operational impact? The key to succeeding in delivering value is to optimize the customer experience. To date, banks have looked at improving their processes. However, customers are comparing their online experiences against their experiences form other industries, such as the consumer products or entertainment industries.

COVID-19 has forced banks to rethink how and when they engage customers. Key examples of changes made include:

  • Much faster decision-making process (e.g., for lending). Digitalizing applications and providing STP to decisioning algorithms has enabled closer to real-time approvals for standard borrowing requests
  • Real-time digital channels: by deploying armies of chatbots, AI, and decision trees; banks have been enabling employees to engage across all channels with customers while knowing who the customer is in real-time.

The banks are not just trying to improve efficiency, they are trying to create empathetic, differentiated experiences in their customer interactions. Creating a value chain that delivers digital, empathetic, differentiated customer experiences will require a synthesis of bank operations, data management, and FinTech partner ecosystems. By integrating digital processing, bank/customer data, and new functionality from an ecosystem of vendors, banks should be able to know each customer and create a custom experience for that customer. The industry is in the early stages of creating such customized experiences, but the journey has begun. For example, a bank has been able to deliver empathetic, customized experiences by digitalizing customer contact apps across silos. This requires all stakeholders to participate to move a project ahead both thoughtfully and at speed.

Banks are not just building customer contact experiences with digital technologies. The panel identified payments as an area of rapid transformation, where customers experience the use of the product itself as a consumer experience. There are two areas within payments that are a focus for innovation today:

  • Payment initiation: identifying the payor at the POS to provide a seamless, real-time payment experience
  • Post-payment services: delivery of services such as credit extension and loyalty program assignment.   

Again, modularizing the process with support from an ecosystem of specialized vendors is enabling payment companies to restructure the industry and improve customer experience.

The key takeaways from the webinar panel are that, because of COVID-19, banks are moving faster than ever to digitalize their businesses. The digitalization of business does not eliminate the human element but rather increases empathy and human engagement to drive a differentiated experience. Because the canvas is large, banks are challenged to focus their investments in high-impact areas. The areas where banks are finding success are in digitalizing processes that draw data and resources from across silos to deliver faster, customized experiences for customers.   

<![CDATA[Mortgage & Loan Industry Facing Profound Changes, Transforms Operational Delivery]]>


NelsonHall recently completed a market assessment and forecast report on Transforming Mortgage and Loan Services. We found that the lending industry is undergoing profound operational change as it adapts to slowing loan growth and emerging customer populations that are younger and more technology savvy. For the past two years, lenders have been:

  • Variablizing and reducing the cost of operational delivery using automation, AI, and third-party operations delivery
  • Moving to hybrid cloud delivery. This trend is still in the early stages and has been accelerating with the advent of the COVID-19 pandemic
  • Standardizing, consolidating, and automating operations across multiple products and markets. Most lenders have been built via M&A and they have tried to differentiate themselves with new loan product features. Standardizing their heterogeneous platforms to reduce cost of delivery and unify customer experience is a high priority
  • Focusing on cost reduction for high-cost processes. Origination, due to its high cost ($3k to $7k per closed retail mortgage in the U.S.) has been the highest priority target for cost reduction.

COVID-19 & other challenges

The COVID-19 pandemic has accelerated these trends and initiated an aggressive move to remote work. Remote work has increased the need for strong cybersecurity and for robust national infrastructure in some emerging markets to support remote delivery.

The external environment has put up barriers to transformation. The key barriers impeding their efforts include:

  • COVID-19: lenders have been focusing on maintaining operations, while shifting to a work-from-home (WFH) environment. The impact has been to put transformational projects on hold for the short term
  • Competitive landscape: the introduction of all-digital lenders, with unproven business models, has led many incumbent lenders to take a wait-and-see approach to business model change
  • Changing technologies making long-term investments risky.

For lenders operating in multiple markets, local requirements make transformation difficult. Market-specific requirements that make a standard global delivery methodology impossible to achieve are:  

  • Local markets require different licenses and procedures, and feature different customer expectations and competitive landscapes
  • Evolving loan product types are based on new data fields and product attributes, making existing taxonomies obsolete.

Lenders adapt transformation strategies

Transformation strategies have had to take these barriers into account. While they have postponed many initiatives, lenders have not abandoned those projects. Currently, lenders intend to restart projects when the impact of the pandemic is clearer, and prior to full resolution of the pandemic. At this point, it looks like these projects will restart by late 2020.     

Digital transformation goals for lenders are changing from cost-focused to agility-focused goals. Key changes in goals for transformation projects include:   

  • Strategic goals are moving from reducing costs to changing business models:
    • Moving from enable remote customers to enable remote employees (due to COVID-19)
    • Transforming to an open banking environment with large ecosystems of partners
  • Financial goals are moving from optimizing at fixed volumes to optimizing at constantly changing volumes: 
    • Increasing flexibility by reducing breakeven volumes and ability to react to change
    • Improving STP by tying front-end to back-end for faster TAT
    • Increasing sales by taking on new customer types facilitated by better analytics
  • Engagement goals are moving from “same mess for less” to “transform”:
    • Standardizing and consolidating platforms and methods across silos
    • Automating to reduce the labor component and manual errors
    • Changing DevOps to facilitate faster, modularized platform renewal


In summary, vendors are changing their goals from cost efficiency for fundamentally static businesses to agility for continuously changing businesses. The operational changes being made will enable and drive further change in the business. These operational changes will drive accelerating change in lenders’ product offerings, customer base, and market presence. The mortgage industry is at the start of a decade-long transformation of its business model. 


Find out more about NelsonHall’s Transforming Mortgage and Loan Services market assessment and forecast report here.

<![CDATA[Genpact’s Agile Approach to Collections to Support Scaling Operations]]>


The past decade since the global financial crisis (GFC) has been good for the lending industry. Loan delinquencies in the U.S. reached their highest level after the GFC in the first quarter of 2010 at 7.4% of commercial bank loan portfolios. Since then, loan delinquencies have fallen to 1.44% of loan portfolios as of the fourth quarter of 2019.  At the same time, loan portfolios have grown 26.8% larger than they were in the second quarter of 2013. During this period, banks and lenders have reduced collections staff as delinquencies have declined. Banks can support delinquency collections if portfolios maintain low default rates.

However, COVID-19 has had a major adverse impact on the economy. During this time unemployment rates have surged and GDP forecasts have plummeted.

This type of economic contraction will aggressively drive up collection activities at banks. But scaling collections activities will be challenging when all lenders will be trying to scale-up their activities at the same time, and as new regulations constraining collection methodologies are being issued.

The automation and operating framework will be critical to successfully navigating the collection environment. I recently participated in a Consumer Bankers Association hosted webinar with Genpact where they outlined their approach to improving collections services. Genpact has developed a three-part methodology for transforming their clients’ collection operations:

  • Immediate response: creation and deployment of rapid response teams with simplified decision-making structures to address emerging issues and deteriorating portfolios
  • Adaptive workforce: reskilling workforces quickly and shifting delivery venues to work-from-home (WFH) or other remote options
  • Strategic capabilities: investing in digitalizing collections processes and embedding cognitive and self-serve functionalities 

The challenge is large, so success requires a set of prioritized actions to make early gains possible. Examples from Genpact include:

  • Immediate response measures taken to date include efforts to proactively identify and remediate high-risk customers before they hit delinquency. Clients can reduce exposure related to high-risk customers by leveraging machine learning to develop and deploy a combination of credit limit decrease and blocking, or proactively offering customers hardship plans. Using text-mining of agent notes from customer service interactions has allowed early identification and treatment of high-risk customers
  • Adaptive workforce measures have had the highest activity to date, and include:  
    • Rapid, remotely delivered workforce training. For example, Genpact is helping a top 5 global bank is ramping up their operations from 600 to 1600 skilled collections resources
    • Workforce multiplier support such as a group of rapid response teams (cross-functional teams that can address the rapidly evolving customer dynamics through agile pods). These teams deliver services such as surge-capacity hiring, training, and deployment all with WFH solutions
    • New models of data usage, both new data forms, and alternative data streams. COVID-19 has changed customer behavior, and ML needs to be used to identify new customer segmentation patterns and the appropriate response. This is not a one-time activity; it requires weekly refreshes as the data/behavior changes
    • Regulatory changes such as the Consumer Financial Protection Bureau’s recently published new contact policies. Straddling compliance and good practice is the need to define and test what empathetic response should be. There are no clear metrics, particularly when it comes to a customer situation where they may be impacted economically, socially, and health-wise
  • Strategic measures taken to date include investments in:  
    • Channels of customer contact and payment beyond the voice channel, including chatbots and self-service
    • Automation of manual back-office processes in collections using RPA or workflow solutions, so that agents can focus on customer management. This has been especially useful for implementing the CARES Act program
    • Use of AI, ML to develop and offer unique hyper-personalized treatment strategies suited to specific situations and requirements of individual customers. These customized solutions can reduce customer hardship as it considers the individual realities to make the debt more manageable for customers
    • Building empathy into conversational tools: for example, real-time speech analytics and conversational AI to prompt effective payment plan matching to customer needs using the appropriate verbiage usage based on customer talk

In short, scaling the same processes, under conditions of reduced resources, increased costs, and growing transaction numbers will not work. Already vendors are addressing these challenges by employing combinations of proactive outreach, workforce training, and technology. Lenders will then be able to increase their effectiveness and scale in collections to meet the rapidly increasing scale of operational delivery required.

To find out more on this topic, view the Consumer Bankers Association hosted webinar with Genpact and NelsonHall here.

<![CDATA[Update: How COVID-19 is Impacting the Financial Services Industry]]>


This is an update on my last blog on the impact of COVID-19 on the financial services industry. Since then, I have interviewed many more industry executives both at banks and at operations services vendors. Industry responses are still muted, but clear signs are emerging that banks will be focused on prioritizing those activities which maintain continuity and support adaptation in an operating environment with larger volume swings.

Key transformation initiatives where banks are accelerating investments include:

  • Remote delivery focused on workforce engagement and a relatively reduced effort in remote customer engagement 
  • Migration to cloud delivery, with its ability to manage large volume swings
  • Data management initiatives, with a focus now on default management applications
  • Consolidation of operation solutions and methodologies. These are longer-term initiatives, but much higher ranking for global institutions than before COVID. At the same time, banks are increasing their search for multiple supply sources.

Banks have reduced their activities focused on support for: 

  • Marketing and sales campaigns: business growth which requires capital has been sidelined 
  • Expansion of suppliers: banks are now focused on vendors with the strongest financial positions. 

Impact on banks to date

To date, the impact on retail banks and capital markets firms has been to move workforces to a work-from-home (WFH) environment. This has not been a hard initial transition for banks in markets with mature internet infrastructure; however, banks in markets with weak public internet infrastructures, such as some Asian markets and most of Africa, have faced significant challenges moving employees to a home environment.

Even within markets, the success of moving to WFH has varied as government policies have changed. In India, the nation went into lockdown on March 24 for 21 days. This was extended to May 3 on April 14. Initially, many delivery centers struggled to move workers to a WFH environment, given a limited number of laptops per worker and poor connectivity in some regions. Over time, bank operations have been able to obtain permission for critical processes to be delivered from centers, with dormitory and hotel housing provided for workers. Non-essential processes have continued to be delivered from home. This has led to worker utilization rates at the largest delivery centers moving from an initial capacity utilization rate of 20% in late March to 60% utilization in early April, to 90% utilization rate with essential work done in centers and large numbers of WFH workers.     

While operations delivery has rebounded,  bank executives we have interviewed expect their businesses to aggressively deteriorate in Q2 2020. Specifically, they expect sales to decline ~25%, costs to increase ~7%, and profits to decline ~45% in Q2 2020. Fortunately, their operations supplier contracts are adequate to support a 20% decline in volumes (and a 25% increase in volumes). No one is sure how long the impact on business will continue. Based on announcements by governments and universities in the past few days, this analyst expects the COVID-19 lockdowns to continue, at some level, for at least six months. The saving grace may be that the continuing shutdowns will be at progressively lower levels of restriction.

Banks have been asked by regulators to provide BCDR plans for themselves and their suppliers. These have been supplied. Of note is that private conversations indicate banks and suppliers are setting triage plans for who and what to focus resources on if the impact of COVID-19 worsens. If that happens, expect to see suppliers retaining service to their most important clients and banks cutting back on product lines (i.e. low margin and risk products) and reducing suppliers to financially stronger vendors.

Transformation projects in production have continued as planned. However, new projects have been stopped in anticipation of restarting the process when lockdowns are lifted. However, as profit levels fall, the focus on cost-cutting will increase. Banks will have to prioritize which projects to restart as they face reduced capital to invest in transformation. Currently, many banks are looking to restart RPA projects when they resume projects. Successful RPA projects can scale processing volumes with a smaller workforce. Because scalability has become so important, banks are looking to restart initiatives that enable scaling, such as RPA and cloud migration.     

Finally, bank product lines have been aggressively impacted. Lending, except for government support loan programs, has all but stopped in all countries. Payment volumes, especially cross-border payments, have plummeted by over 20%. Physical branches have been shut down for business. The fall in activities has reduced operational requirements, but at the cost of profits for banks and revenues for their services providers. While bank executives have not projected volumes beyond Q2 2020, the outlook is very weak for a turnaround during the remainder of this year. ITS and BPO vendors will have stable revenues from long-term contracts. However, these vendors will find that new contracts are few and far between. Some BPO vendors are expecting to grow their business at +20% (annual rate) by buying bank or service vendor captive operations. As bank and vendor liquidity becomes a concern to regulators and investors, there are now captive operations actively for sale. For the next year, successful BPO vendors will have an active M&A strategy in place.        


To summarize, banks have not yet changed their operational delivery activities with third-party vendors. They have reassessed their BCDR plans. Financial institutions have begun to see very substantial drop-offs in transactional activity, and they expect this to impact their revenues and profits starting in Q2 2020. The largely anticipated drop-off in revenues and profits will drive a reassessment of their services contracts to drive lower pricing and sale of operations. There will be a consolidation of vendors and pressure on pricing. The scale and scope of the transformation in sourcing arrangements will be driven by the length of the COVID lockdown. When the lockdown abates, banks will redouble their efforts in digital transformation to prepare for any future pandemics.

My next blog post will address the impact to date of COVID-19 on services vendors to the banking industry.  

<![CDATA[How COVID-19 is Impacting the Financial Services Industry]]>


COVID-19 is impacting banking operations and, as a consequence, related business process services (BPS). Banks are already restructuring operations to address the emerging challenges from COVID-19 (see below for those challenges). The changes are just beginning and will continue to evolve over at least the next four months. While the global adaptation to COVID-19 will take much longer, perhaps several years, each country’s banking industry will need to make sizable adaptations to their operations in a four-month timeframe in order to survive without permanent impairment to their business. The four-month timeframe for adaptation within each country assumes two months for COVID-19 to stabilize in each market and two additional months to implement measures to mitigate any future pandemic risks. Across all markets, operational adaptation will take one to two years to fully implement. 

Operational impacts to date

So far, the operational impacts have manifested across customer access  and employee access.

Access for both customers and employees has been impaired due to:

  • The inability of customers to enter brick-and-mortar locations, often due to the imposition of lock-downs by governments
  • Volume spikes in transactions creating online access and processing delays, often due to market reactions (e.g. stock market declines and liquidity demands)
  • Alternative demands on time (e.g. from children at home)
  • Inability to conduct standard sales and customer in-person interaction.    

Actions being taken to mitigate these impacts have included:

  • Increasing remote access options by:
    • Increasing capacity for online access, typically via increasing cloud access to core systems
    • Sending omnichannel access apps to customers for their use
    • Outbound messaging on what options are available for remote access 
  • Scaling processing capacity by increasing:
    • Access to remote temporary labor
    • Use of RPA
    • Cloud capacity of core systems (especially transaction systems)
    • Processing capacity to match diurnal demand spikes
  • Operational hygiene reviews, including:
    • BC/DR plan updates
    • Liquidity planning (including drawdowns of credit by BFS clients)
    • Reviews of in-branch operations changes, including increased availability of cash in branches and customer interaction SOPs 

Bank product line impacts

The impact of COVID-19 within the banking industry has varied by product line, as follows: 

  • Commercial loans: increased drawdowns of committed loan lines by customers to assure liquidity. Also, certain consumer-focused industries such as restaurants have shut down operations, cutting off revenue-generating capabilities. These activities have increased risk exposure, tracking efforts, and funding requirements. Operational impacts include increased data gathering and reporting requirements
  • Payments: retail customers withdrawing physical cash from branches to assure liquidity if banks are shut for a period. This temporarily increases operational loads on the branch system. Operational impacts include increased staffing and a shifting product mix for daily operations at branches     
  • Mortgages: anticipated loss of income will reduce loan origination demand while increasing the need for default management. Operational impacts include changing skill sets required for bank workforces and increased loan loss reserves. Increased loan loss reserves directly require reductions in the balance sheet. Shrinking the balance sheet requires significant senior executive effort.   
  • Student loans: temporary closure of colleges seems likely to reduce demand for new student loans but is likely to lengthen the repayment period for existing loans. Reduced job prospects increase default management requirements. Operational impacts include changing skillsets from loan origination to default management.  

Additional impacts by product line will emerge over time. Trade finance will likely be very heavily impacted by the pandemic.


To summarize, operational impacts to date have been focused on reduced in-person access to financial services purchase and delivery. Business impacts to date have been focused on increased credit risk and the shift in resources from revenue generation to risk mitigation.

We expect that over time the impacts will cause banks to shift product mix, employee skillsets, and channel delivery. The costs of changing products, workforces, and delivery will be very large.

We will be monitoring this space to develop a much more granular understanding of how these impacts will reshape financial services operations. We are conducting multiple banking executive interviews (>100) across all geographies to ascertain:

  • Emerging priorities
  • Lessons learned
  • Best practices
  • Impact on business
  • Decisions made.

We are also conducting interviews with leading BPS suppliers to ascertain the impacts on their business and how they are responding to the impact of the COVID-19 pandemic. We will be reporting on this rapidly evolving dynamic over the next several weeks.

In the meantime, we would like to hear your feedback.

<![CDATA[Establishing Digital Banks Requires Commitment and a Clear Roadmap]]>


Banks have been aggressively transforming their operations to a digital delivery model. It is well known that a key driver, across all industries, is the need to attract new, primarily young, customers who prefer omnichannel interaction with vendors and demand high-quality CX in their business interactions. Less well known are two key drivers that make speedy transformation imperative. They include:

  • Open banking regulations: they are driving changes to the business model. A successful transition requires operational agility, efficiency, and accuracy to enable emerging models and openness to allow external participants
  • Price compression: the need to increase revenues to offset price compression requires improved sales/marketing campaigns with analytics, improved coordination across silos, and faster time to market for new banking products.

Regulations and price compression are making transformation an urgent need. However, the back-end structure of banks, monolithic 30+ year-old legacy platforms, present transformation challenges. Key challenges include:

  • Digital technologies: emerging vendor landscape requires significant ongoing due diligence efforts
  • Accessing emerging technological capabilities requires deciding when to partner, use open source, acquire, or share products
  • Cybersecurity: increasing use of cloud, shared, and open environments increase vulnerability to cyber threats 
  • Open banking requires the ability to adopt new digital business models, both in services delivered and internally delivered ops
  • Standardizing process execution: Agility to adapt standardized execution to new processes, ending obsolete processes and standing up new processes. Agility is created from the successful assembly of software modules as required
  • Cloud/PaaS/systems integration/consolidation: Banks need to standardize platforms to drive STP. Banks have limited internal staff, requiring third-party support for new platforms and operational delivery.

To address these challenges, services vendors have focused on professional services for on-premises platforms for large banks and cloud-delivered platforms for startup and regional banks. Increasingly large banks are looking for hybrid cloud-delivered platforms and modules. Digital technologies have reduced the effectiveness of labor arbitrage strategies. Vendors are aggressively automating their own delivery to remain relevant. Cloud-delivered DevOps is increasingly in demand by all clients. Banks want support for analyzing transactions and entities (customers and counterparties) to drive greater analytic insight and capability development.

Over the next eighteen months, services vendors will:

  • Expand and deepen their ecosystems of FinTech product vendors with a focus on AI and DevOps for customer acquisition
  • Expand their cloud vendor ecosystems to support moving new workloads to the cloud
  • Expand their API libraries to support new markets and the integration of banks’ vendors into their digital operations
  • Enhance their tools’ ability to make predictive analyses, not just descriptive analyses
  • Connect front-end customer engagement to back-end processing, enabling STP and rapid fulfillment
  • Refine their use cases to create higher yield rates for POCs (an increase from the current rate of <60%).

Banks we have spoken with are accelerating their plans to move to digital operations, both transforming their legacy operations and starting new digital initiatives. Many “all-digital” startups at established banks have shut down as the initial use cases failed to meet their goals. The common underlying reason for failure is that digital banks do not run themselves; they require ongoing investment and attention in order to succeed. Similarly, cloud operations do not reduce the cost of delivery in the long run. Cloud operations increase flexibility, which allows banks to enter and exit markets and products with minimal cost to the business. Banks with a clear roadmap and determination to go all-in on digital will have the best chance at creating a successful digital business.

<![CDATA[3 Key Growth Segments for Banking ITS & BPS in 2020]]>


Banks will spend 2020 pursuing three key initiatives that have not been a priority in the past. Two of them, open banking and cloud delivery, are technology environments that have just recently matured to the extent that banks are able to drive business model change with them. The third priority is M&A driving large ITS engagements, and is typical of late-stage economic cycle activity. However, we are in a ten-year long economic expansion, and high levels of M&A have not been seen since the last late cycle stage.

Open Banking

Regulatory deadlines are driving open banking adoption, and Europe is the leader in open banking regulation. The two key regulations PSD2 (European) and The Open Banking Standard (U.K.) had go-live dates in September 2019, and the trend started strongly in the closing months of 2019. In the U.K. from Sept. to Oct. 2019, the number of regulated providers was up 4.4% and the number of regulated entities with a live offering to customers was up 9.4%. Those numbers run at ~200% per year growth when annualized, and the pace will accelerate in 2020.

Our conversations with bank executives indicate their highest business priorities are:

  • Increasing average revenue per customer
  • Launching new products and services to generate new revenue streams.

In 2020, they will focus their open banking initiatives on customer services, online commerce, and payments to drive customer acquisition and revenue growth.

Cloud Delivery

Banks are moving to the cloud to reduce time-to-market and cost of delivery, and are moving to hybrid multi-cloud environments. Hybrid cloud, the use of private and public clouds, will remain the paradigm of choice. In 2020, the use of public cloud will accelerate aggressively, with tier one banks increasing their allocation to public cloud from the current 3% of overall IT environment to 6% by mid-2021. Multi-cloud, the use of multiple cloud vendors (e.g. AWS, Azure, Google, IBM, etc.) will also increase. AWS was very early to the cloud game and has developed strong functionality. New vendors are rapidly building cloud capabilities (such as consumer data management capabilities at Google) which will target specific workloads. Increasingly, banks will engage with cloud vendors for specific workloads due to proprietary functionality.

IT services vendors will support banks’ initiatives by delivering cloud services with cognitive-enabled operations using proprietary components to support business model change. The new business models will focus on rapidly introducing new low-margin bank products, which have low financial risk. This will allow banks to focus less effort on portfolio risk management and more effort on increasing sales per customer. Expect to see an explosion of deposit products and highly standardized consumer credit products. Many of these products will have much lower sales than were needed in the past. However, low-cost cloud delivery will drop breakeven for each product, allowing for the profitable expansion of low-volume products targeted at consumer life-stage needs.  


M&A by banks grew in 2019 and will accelerate in 2020. Banks are exiting businesses where they lack a competitive advantage and are selling those businesses to concentrate on future growth opportunities. Most sales are to other banks, but in some cases banks are selling their operations centers to third-party services vendors. For example, recently, Cognizant acquired the operations of three Nordic Banks which were joined into one vehicle, Samlink.

M&A deals derive most of their value from a rapid transition to integration into the acquiring organization. The integration process requires ITS to integrate technology systems and business process management services to integrate operations across the two institutions.

Successful, rapid integration requires burst support in order to transition operations rapidly to the final state. Third-party services vendors are the only available source for skilled labor at scale on short notice. Core banking platform expertise will be key to winning deals, but digital technologies will be required to support the agility needed to cost-effectively re-engineer the operations of both the acquiring and acquired banks. We expect M&A deals will drive even faster movement by banks into cloud delivery, especially public cloud environments.


Each of these three growth segments will provide banks with increased agility to adapt to a rapidly changing business environment. The agility developed will be useful to banks after 2020 as they change their business models once again to address Brexit and the changing financial environment in Asia.

<![CDATA[NIIT Technologies Delivers Digital Transformation with Capacity & Capability at Speed and Scale]]>


At its 2019 Engage Client Forum last week, NIIT Technologies explained how it is adapting to a continuously changing business and technology environment to deliver digital transformation for its clients.

At its 2019 Engage Client Forum, NIIT Technologies explained how it is adapting to a continuously changing business and technology environment to deliver digital transformation for its clients.

Four key strategies

NIIT Tech identified four key strategies it is pursuing:

  • Hyperspecialize in key industries: NIIT Tech has chosen the Insurance, BFS, and Travel industries to focus on. Its teams have adapted their approach from bringing technology to clients to analyzing business problems and bringing in technology to solve a business challenge
  • Involute: Tying together cognitive, data, automation/integration, and cloud to accelerate value creation. NIIT Tech believes the next phase of digital transformation in the industry will require stitching together the entire business process with cognitive and digital technology to eliminate bottlenecks which have reduced value creation in past industry reengineering engagements   
  • Moving the center of gravity closer to the client: by onshoring increasingly, and setting up delivery centers specialized in key industry processes (e.g. the center in Boise, Idaho which specializes in digital integration and Pega services)  
  • Building a partner ecosystem: clients, including tier ones, have indicated they have difficulty curating an effective technology partner ecosystem. NIIT Tech helps them by scanning the field in a small set of industry domains for solution vendors who offer a product which can be integrated into NIIT Tech client domains in a way that provides agility, lower cost, and digital functionality for the client. The key attribute is solutions that approach problem-solving from a business perspective rather than from a technology perspective. Present at the conference were four FinTech partners:
    • Steeleye: compliance technology and data analytics vendor
    • Fennech: treasury solution for allocating and reconciling bulk payment allocations  
    • Appii: employment background check and validation platform which uses blockchain for CV verification   
    • Duco: data management solution vendor for data normalization, migration, regulation, and reconciliation.

Banking sector focus

NIIT Tech is building proprietary IP to drive forward its digital services initiatives. Key to the banking industry is:

  • Open-source software. Key examples include:
    • Infrastructure-as-a-code: NIIT Tech uses Terraform, which is an open source infrastructure as code software tool created by HashiCorp. It enables users to define and provision a data center infrastructure, and it works with most cloud provider environments, including AWS, Azure, Google, and IBM
    • Core banking platform: NIIT Tech uses BankingEasy,  a cloud and web-based, multi-user, multi-currency and real-time, modular, core banking platform. The platform runs on n-tier, service-oriented architecture on Microsoft Azure.
  • Application performance management framework: this tool helps clients with heterogeneous legacy environments to manage application lifecycles more efficiently to improve application behavior in a complex operations environment by analyzing the monitored data for the entire relevant operations environment giving real-time performance visibility across the application development lifecycle. It also informs how the application performance is impacting a client’s business and identify areas which require immediate attention. The framework is powered using AI and automation capabilities, thus reducing manual efforts and enabling teams to focus on product innovation.
  • Jumpstart analytics: NIIT Tech via its jumpstart analytical offerings, Maestro and Xpresssssss, helps clients modernize their data landscape by setting up data lakes, and migrate their legacy data warehouses to cloud technologies (AWS, Azure, GCP, etc.). Their data science library of pre-set use cases (e.g., credit scoring, fraud detection, customer/advisor churn, etc.) enable clients to realize business objectives via advanced data science techniques.  

The client view

During the conference, I spoke with many clients about their activities with NIIT Tech, providing the following feedback:

  • NIIT Tech is starting U.S.-based training programs to support reskilling the client’s employees
  • It is willing to co-invest with clients in projects by spending 2 to 4 weeks working on use case development without charging for the engagement
  • NIIT Tech employees are moving from a labor-based delivery mindset to a business outcome-based mindset, which more closely matches the client’s approach to challenges.    Clients want vendors to proactively provide suggestions, which NIIT Tech is increasingly providing. NIIT Tech can provide both labor capacity and capability as required rapidly when they have spike demand for resources   
  • Cloud data management services can drive major operational improvements. One asset manager stated that their quant investment team was able to reduce the daily computational time required to drive their quant strategies from 19 hours to 1 hour per day
  • NIIT Tech is providing support for moving to a poly-cloud environment (i.e. multiple third-party cloud vendors). NIIT Tech’s Infrastructure-as-a-code offering is effective for working in a poly-cloud environment.  


NIIT Tech is transforming itself to capture digital transformation opportunities and is investing heavily in IP and partnerships. It has built IP using open source code, which delivers solution modules that can be deployed with 40% less cost, time, and effort.

The key to NIIT Tech’s success has been its ability to deliver services and outcomes quickly and effectively. Accordingly, NIIT Tech’s employee training and digital tools all focus on delivering functionality and high speed. As one NIIT Tech executive put it, “Data is king, speed is emperor”.  

<![CDATA[Infosys Accelerates BFS Growth in NA with Platform-Based Digital Services Sales]]>


At the 2019 Infosys Confluence North American event last week, we spoke with execs about how Infosys has been driving accelerated growth in the BFSI sector in North America. Most of Infosys’ revenues in BFSI are in Banking and Financial (BFS) services, where the recent growth been based on the following major activities:

  • Installations of Finacle: in the past two years, Finacle, which now has 540 installations globally, has seen increasing adoption in North America. Key to this has been a focus on modules that solve immediate client problems, and then radiating to additional modules as required. Key high demand modules in the North American marketplace for Finacle include:
    • Digital engagement suite
    • Payments platform (electronic payments)
    • Commercial banking
    • Setting up a new digital bank (Finacle has regulatory approval in 50 states, something only a few legacy ISVs have)
  • Reengineering sales engagements: Infosys has restructured its GTM from an offering siloed approach to a client management team approach. This change in approach has helped deliver improved topline growth in North America, from 4.5% (as reported) in FY18 to 8.1% in FY19, outstripping both Accenture and TCS
  • Design-led transformation engagements: e.g. creating the branch of the future for a regional bank.

Current areas of focus in BFS segments include:

  • Mortgages: this is the largest single LOB revenue generator in the retail banking industry. In Europe, Infosys has recently formed a JV with ABN AMRO’s mortgage operations in the Netherlands, taking a majority stake (see our note here). And in the U.S., Infosys has acquired the entire IT team of a regional Charlotte, NC lender. It has also recently hired an industry veteran to rationalize its North American mortgage go-to-market activities and grow the business. The ability to scale operations up and down in the notoriously volatile lending industry is a key reason some lenders are adopting Infosys’ cloud-delivered mortgage services. Using its regional centers, it expects to grow its local lender business to 20% of its overall U.S. mortgage revenues  
  • Wealth and Asset Management: W&A managers need to launch new fee-based products to market rapidly to grow their business. The Infosys services team has been able to support new product development based on its work with market infrastructure providers. The Finacle platform allows new modules to be set up quickly (often in a quarter of the time an internal set-up would take). The reduced time to market provides significant sales acceleration to the client. Revenues from this type of engagement, and the pipeline, have grown rapidly over the past two years.

Banking clients we spoke to said that they anticipate continuing to move to the cloud (the reduction in time-to-market making the cloud value proposition compelling even when the cost is higher) and remain committed to moving to a hybrid cloud environment. They anticipate that the next big technology disruption in their sector will be the adoption of ML, which will accelerate over the next 24 months and start to deliver robust value.   

Infosys’ banking sector business has regrouped its GTM, with a clear focus on providing agility to banks so they can reduce their time-to-market with new product introductions. Infosys claims typical cost reductions of 40-50% and reduced time to market. Their increased sales growth indicates it is working well.

At the same time, Infosys has continued to invest with technology and operations acquisitions and will continue to increase its footprint in Western Europe and the U.S. One challenge will be handling volume swings when the market turns.    


A major focus at Infosys’ client event was its Live Enterprise (LE) approach - we will shortly be publishing a separate blog on this.

<![CDATA[How Capgemini is Helping Banks Transform Trade Finance]]>


Improving efficiency and reducing manual processing of trade finance services has been a difficult challenge for over a century. However, the industry is on the cusp of a transformation which promises to standardize and automate this highly idiosyncratic, manual ecosystem. This blog identifies some of the key trends in trade finance transformation and how one vendor, Capgemini, is supporting banks in this transformation.

Trade finance industry trends

The trade finance industry is undergoing multiple, concurrent changes, including changes in participants, routes, underlying products, and communications channels.  These changes  require the underlying processes to become digitalized. However, the increase in stakeholders and process complexity inhibits the implementation of the changes required. Key industry changes include:

  • Continued growth in trade finance volumes. Headlines trumpet a trade war which may end up being very temporary. However, even a trade war will drive increased trade finance activities as alternative routes require increased levels of finance to support standing up new supply chains.  Current processing is manually delivered by experts who developed their skills on-the-job. Scaling these resources, as industry volumes are expected to grow faster than the world economy, will be impossible without long lead times (more than a decade)
  • Shift from product-based to services-based trade. The shift in underlying goods traded will necessitate new skills which cannot be taught on-the-job, at any scale
  • Shift to usage-based contracts from ownership-based contracts. These contracts will also require new skills to process. In addition, the change to usage-based contracts will lengthen the amount of time the LOCs will remain outstanding, as well as changing the conditions for a drawdown
  • Shift in shipping routes (Atlantic trade to Pacific trade, Northern hemisphere to Southern hemisphere). Trade finance practices vary by trade route. The shift of volumes to emerging routes will shift the skillsets required at scale 
  • Growth in digital and omni-channels The shift of business processes to digital channels will necessitate a shift in business practices for trade to a digital environment.   

These changes necessitate the following digital transformation requirements:

  • Standardize and automate processing
  • Allow adaptation of processing by route and channel
  • Process new underlying product types, primarily services

Below I look at two client cases from Capgemini and how both engagements addressed these three digital transformation requirements.

Top 5 global bank based in the U.S.

  • Challenge: automate and enhance the processing of trade finance operations:
    • Assess and recommend a trade finance solution which would automate processing and provide “best-in-class” functionality
    • Ability to process non-traditional products.
  • Scope:
    • Assess six solutions and activities at five competitor banks
    • Assess ability to process non-traditional products including open accounts, dynamic discounting, early payment, e-invoicing, supply chain finance.
  • Benefits:
    • Rigorous multi-stage selection process for solution
    • Identified and selected optimum solution which automated existing manual tasks and added capability to process new product types.   

Large European bank

  • Challenge: change the operating model for structured finance of commodities under conditions of changing regulation and business environments
  • Scope:
    • Review documentation of as-is processes
    • Analyze unique characteristics of structured trade finance processes
    • Analyze evolving compliance requirements
    • Address stakeholder constraints/concerns
    • Develop a target operating model to digitalize the processes.    
  • Benefits:
    • Reduced headcount by six FTEs
    • Reduced costs by $1.5m across APAC region
    • Increased operational efficiency.


These cases highlight how digitalization of trade finance requires automation, adaptation by channel, and enablement of new product types. The existing state of highly manual processing allows very large efficiency gains for a successful transformation. Challenges to successful implementation include:

  • Many solution vendors are developing offerings, which requires expertise to assess relevancy and quality for the banks
  • A bank’s business roadmap is becoming increasingly important as operations transformation must mesh with bank product services (e.g. support for open accounts and dynamic discounting). Synchronizing business and operations roadmaps requires two disparate executives teams with differing incentives and drivers to agree to compromise on their internal roadmap for the good of the organization.    
<![CDATA[HCL’s EXACTO Intelligent Automation Streamlines Bank Trade Processing]]>


The BFSI industries are increasingly looking to intelligent automation (IA) to address key challenges in their business. A recent NelsonHall survey of 50 BFSI executives found that they perceive that IA is able to replace manual processing and human decision-making, allowing the bank’s operations to decouple processing volumes from headcount. Key benefits respondents expect to receive from IA include:

  • Improved handling of low value transactions (100% of respondents)
  • Reduced cost (98%)
  • Improved service fulfillment times (96%)
  • Reduced error rates (92%)
  • Improved customer experience (88%).

However, achieving these benefits has frequently been challenging because:

  • Use cases are domain intense, allowing at most 50% reuse for similar processes 
  • Implementation is labor intense, often requiring 4 to 6 months of time and costing up to $1m 
  • Unmanaged bots can learn the wrong things and “go off the rails” over time, destroying value
  • IA is not one technology, but multiple technologies working in concert, which makes effective systems coordination critical to delivering a useable solution.

The complexity of these challenges requires IA vendors to create a roadmap and deliver an offering which targets a narrow range of problems. Typically, there needs to be three types of participant in the development of an IA offering:

  • Systems integrator: who will identify client needs, implement the customized solution, and manage the ongoing operation of the IA solution to assure continued effectiveness
  • Academic partner: who will provide advanced cognitive technological tools and insight to develop a differentiated offering
  • Product vendors: to deliver COTS RPA and basic IA tools to the offering.

Let’s look at how one vendor developed an IA offering, and then at an example of how it was deployed.


HCL decided to create an IA offering in 2016, focusing their product on the processing of unstructured data. They began their process by partnering with a leading U.S.-based university, which had developed analytic solutions for processing radiology images. The image processing capability would be useful for processing physical paper documents used in banking contracts, procurement, and handwritten documents.

HCL launched its IA product, EXACTO, in 2017. The underlying platform is built on open source machine learning libraries. The product uses servers with GPUs to run Deep Neural network algorithms. EXACTO can integrate into an existing workflow application with a single API. It has four differentiating capabilities:

  • Image processing: fixes distortions, removes noise, and sharpens images
  • Text recognition: extracts text from heterogeneous fonts/handwriting. Detects multi-languages
  • Domain ontology: provides data correction and search-and-sort fields from data streams
  • Deep learning and natural language processing: extracts localized characters and classifies documents.

HCL claims EXACTO achieves 85% to 95% accuracy on typewritten documents and 60% to 65% accuracy on handwriting. It processes documents in three stages:

  • Digitization of document images
  • Classification of the output into categories
  • Extraction of data from the digital output, which is then fed into the target application.

Let’s look at how EXACTO was applied to a very manual, paper-based processing environment.

Trade processing at a global bank

Trade processing is well known for using faxes across very large numbers of parties to conduct business, and frustrates attempts at process automation. The process has a T+1 reconciliation window, which drives increased costs as labor needs to be applied in volume to meet the deadline. Initial errors from manual processing are enhanced by errors introduced by manual processes in the audit trail. Typical errors include:

  • Trades erroneously marked as processed in the source system, when they have not been entered into the target system
  • Trades marked as duplicate when two similar, but different trades are received from two different brokers
  • Data entry discrepancies at the time of trade booking which are not caught until reconciliation.

EXACTO was applied to the processing of faxes and paper documents. It classifies documents using a domain ontology and extracts text into a digital form which is then processed.

Benefits from the use of this IA solution include:

  • Reduction in average handle time of 60%
  • Enhanced accuracy due to machine learning
  • Improved audit trails and compliance
  • Can identify duplicates and correctly tag them
  • Continuous automated evaluation and improvement of process
  • Can run multiple instances to process large volumes
  • Able to process 24/7, unlike humans
  • Auto-capture of data without the need to configure each input template.


As described above, IA is enabling institutions to read documents and pictures faster and more accurately than humans. It is then able to process the resulting information with greater accuracy and speed. The traditional cascade of errors is mitigated, improving regulatory compliance and customer satisfaction. The key to success in this endeavor is finding the appropriate technical IP (in this case in a partnership between domain experts at HCL and image reading technology at a leading U.S.-based university) to solve complex interpretation challenges. The resulting solution can process low-value transactions at high volume and with high accuracy. This type of solution will increase the number of high-volume, low-value transactions which banks will be able to deliver profitably, expanding the range of possible products they can introduce to the marketplace.   

EXACTO is trademarked by HCL.

<![CDATA[The Characteristics of Successful Blockchain Deployments in Banking]]>


Blockchain has been a focus of technologists, VCs, and media pundits for several years now. However, to date, operational deployment remains minimal. Of all enterprises already working with blockchain, only a few percent have a scale operational deployment. Blockchain has seen three stages in its short history:

  • Lab testing of the technology: 2014 to 2016. Key events include the launch of Ethereum, Hyperledger, and R3
  • POCs: 2016 to 2018. Key events include the launch of BaaS (IBM, Microsoft JV), B3i (insurance), Marco Polo (trade finance), MOBI (mobile DLT), IIN (interbank information network)
  • Operational usage: 2019 onward. Key launches include NASDAQ LINQ, JP Morgan JPM Coin, Binance and the recently announced Facebook’s Libra.

Activities are slowly moving from exploring the technology and what it can do to finding out where it can be profitably applied to business cases.

Achieving effective operational deployment

Businesses are finding that key steps in making effective operational deployments include:

  • Identifying compelling use/business cases, where key components include:
    • Business value: cost reduction needs to be significant and ongoing
    • Transaction execution speed: distributed ledger technology currently does not execute quickly. However, the evolution of private consensus mechanisms and permissioned blockchain networks, has addressed many of the concerns for DLT over speed and scalability
    • Ecosystem openness: closed systems (e.g. exchanges or closed payment platforms) are inherently more likely to see an alignment of partner goals and values
  • Building the right reference architecture: an enterprise blockchain platform is more than just a blockchain technology stack. It encompasses Infrastructure (data, storage, network), security (including auditing), applications (templates, IDE, testing, integration), and operations (monitoring, smart contract management, ecosystem management) in addition to the platform itself (consensus management, smart contract execution, etc.)
  • Identifying relevant partners, including product and business partners. The partners need to have as compelling a need to join as the promoter’s need, which often has not been the case
  • Creating an effective governance mechanism: mechanisms require addressing the needs of regulators, participants, and customers
  • Adoption: buy-in requires both a thoughtful explanation of cost/benefits and a forceful statement of ecosystem requirements for continued participation as a member. The priority for promoters of a blockchain proposal is to maintain trust while participants are undergoing the major operational changes blockchain brings.

Example of successful blockchain deployment application in Banking

So, where can blockchain be deployed effectively in an operational environment? I caught up with Capgemini recently on one of their blockchain engagements that has gained significant traction. In this case, Capgemini deployed blockchain to address KYC in the banking industry. The client is a consortium of banks that wanted to reduce the cost of its combined interbank KYC activities. Key aspects of the engagement were:

  • Challenge: Banks typically conduct KYC/AML verification with manual, multi-step processes. Processes are repeated across banks and internally across departments for the same customer. The consortium wanted to simplify and automate processing to reduce cost and error rates. By sharing KYC/AML data for a given customer across departments and banks, the consortium wanted to reduce duplication of static data processing
  • Scope of engagement: Capgemini designed a hybrid Hyperledger Fabric/R3 Corda solution that enables KYC data collected by one institution to be validated and shared among multiple institutions. Each participant bank can fill in the complete KYC profile with elements of their own data. The resulting KYC profile is more robust since it can be verified by more than one participating institution. Every bank shares the same decentralized master copy of KYC data
  • Benefits:
    • Reducing cost from a reduction in duplicative processing and increased automation
    • Improving speed at which KYC record documentation is completed due to the reuse of static data, rather than reconstruction of data for each KYC report
    • Increasing accuracy resulting from data sharing.

The characteristics of successful deployments

The case above highlights that successful deployments of blockchain are often characterized by:

  • Input processes taking data from multiple, heterogeneous sources, which are then manually processed with little standardization across internal or external silos
  • Output processes delivering relatively simple, highly standardized reports (e.g. go/no go decision on doing business with this entity)
  • Participants sharing the goal of obtaining the same output with no competitive pressure and proper governance mechanisms
  • Blockchain technology creates a statement of record which should be used to eliminate repetitive reconstruction of static data for each transaction. This creates efficiency by eliminating steps.   

Institutions looking to deploy blockchain trial 100 POCs on average to find ~3 use cases to operationalize. By looking at the characteristics of successful deployments, institutions will be able to focus their experimentation on projects with a much higher likelihood of being valuable in a business setting.

<![CDATA[TCS Focuses on Human Challenge to Drive Enterprise Digital Transformation]]>

NelsonHall recently attended the TCS Innovation Forum 2019 in New York. The forum demonstrated clear progress in TCS’ thinking and approach to Business 4.0 since last year’s conference – TCS has identified human engagement and buy-in with the principles of Business 4.0 as critical to successful implementation and value realization in business transformation. And human buy-in is applicable at multiple levels in an enterprise’s journey, not just the initial buy decision.

Successful Business 4.0 projects are different from traditional projects at three key levels:

  • Approach to technology: the approach changes from large project scope with minimal component transparency (using long development roadmaps, employing siloed teams using waterfall development methods) to small project scope with high, ongoing stakeholder feedback (employing scrum teams using agile development methodologies)
  • Use of solutions: effective use of solutions requires the employment of meta-frameworks to articulate business metrics and technical criteria for solution selection and deployment. Large libraries of experience-sourced benchmarks underpin the weighting of each criterion for specific environments considered  
  • Sourcing solutions: the emphasis shifts from standardization on a solution suite, to selecting the optimum solution for a specific task. Because much of the functionality is only available from emerging product vendors it is necessary for integrators to use larger ecosystems of product partners, which are continually evolving. 

Multiple client conversations presented at the conference highlighted how digitalization of the business has changed the approach required to solve operational challenges. Key examples given across sessions included:

  • Data management KPIs are changing as processing data is less of a challenge, while curating data is becoming more of a challenge: deep learning can use vast quantities of data. Today, the algorithms to analyze data are robust, but data quality remains a key challenge. Several clients discussed their efforts to reduce the amount of data analyzed and draw conclusions from a more limited, but much higher quality data set
  • Testing simulations to reduce resource and time requirements while increasing learning feedback:  systems do not work in silos, but planners and controllers operate in task silos. Globally optimized system development requires analytics support to allow developers to understand complex system-wide interactions. Increasingly advanced enterprises are using digital twins to allow technologists to shorten their learning curve in real-time to produce effective project deliverables
  • Data democratization: Harvesting greater value from data requires more stakeholders to access and process that data. Advanced enterprises are increasing appropriate access to the use of data while masking components which need to remain private. Increasingly, enterprises are developing sophisticated strategies for determining what, where, when, and how access is granted 
  • Reverse innovation: Innovation on large legacy systems is proving to be less effective than de novo projects where there are no legacy systems, procedures, or fiefdoms to defend. Enterprises are launching new ideas in emerging markets and then they (or TCS) bring those projects back to mature markets when fully vetted.

TCS and several clients provided a deeper dive into their data activities in a breakout session. TCS’ data services strategy is underpinned by three offerings:

  • DATOM: a data and analytics maturity assessment, consulting, and advisory framework that enables customers to drive their growth and transformation strategies at the board level or CxO level, leading to multiple downstream initiatives
  • DAEZMO: a framework that includes Machine First accelerators and leverages cloud, containerization, DevOps, data virtualization, etc. to modernize the existing data landscape to be business 4.0-ready  
  • Decision Fabric: a cognitive business engine that enables the automation of complex business processes and powers contextual industry offerings.

The underlying solution accelerators support the move to cloud-delivered, agile data management services. TCS sees the following shifts occurring in data management activities:

  • Data gathering and curating: currently consuming 50% of enterprise applied effort, this will shift to just 10%
  • Data analysis and decision: currently consuming 10% of enterprise applied effort, this will shift to 50%.

Repeatedly, clients stated that they did not find the move to cloud saved them money. However, it did make real-time and near real-time analytic computations possible, which created significant differentiation in time-dependent processes. Often these processes were customer-facing, which increased sales closure and/or increased CSAT. Effective cost control required a shift in management focus from the cost of provisioning services (old model) to cost of controlling usage (new model).

The challenge in innovating operational systems has become a challenge of changing people’s mindset to focus on the key levers that new technology offers. Therefore, emerging markets are often producing the fastest adoption of digital technology, as there is no legacy mindset to overcome. TCS works with the largest institutions to support this type of change. It is just now creating the productized offerings that will be able to support mid-market firms adopting digital technologies (business 4.0) en masse.

<![CDATA[EY Becomes a Services Delivery Orchestrator with wavespace]]>


NelsonHall recently attended the EY Global Analyst Summit in Boston. EY has grown its revenues at 8.5% CAAGR over the past five years, while investing heavily in technology and adapting its business model to become an IP-based services vendor rather than a provider of pure labor-based services. 

Here I take a quick look at EY’s wavespace offering and how it is being used to provide value for large enterprises. EY believes that large enterprises have many good transformation ideas but fail at execution. To improve execution of transformation projects, EY uses Geoffrey Moore’s “Zones to Win” taxonomy, which defines four project types each requiring a different mix of resources to succeed. EY believes it provides three core competencies to solve the disruption challenge:

  • Design of services
  • Business model innovation
  • Engineering.

EY’s goal is to drive large ($100m plus) transformation projects. EY’s wavespace network, launched in March 2017 with 15 centers, has now developed to a network of:

  • Flagship centers, with a full range of services in each center. There are currently 20 flagship centers
  • Satellite centers, with a sub-set of services and focused expertise. There are currently ~2x the number of flagships centers 
  • Pop-up centers, which are flexibly available. These are client/engagement-specific temporary centers focused on a specific challenge a client is facing, delivered from the cloud to an EY or client site.  

Wavespace events at a center require pre-planning to pull in the right mix of:

  • EY subject matter experts
  • Client stakeholders with the domain responsibility and knowledge
  • Third-party partners with expertise and IP.  

Events run for one to three days, and EY wavespace delivers 700 events in the U.S. per year. As EY has developed its delivery model for wavespace, delivery has moved from a location-based event to an as-a-service offering independent of a physical place. This allows global organizations to develop their own customized offerings in a highly decentralized fashion.    

The consulting services EY delivers are supported by:

  • Proprietary IP, focused on tools to massively source data/capabilities online and harness these resources to enable small teams to apply them to specific projects:
    • EmbrYonic: a cloud-based AI platform to analyze relationships between traditional and disruptive businesses. It tracks VC and M&A flows on 6.5m companies   
    • Transformation hub: a learning portal used by EY clients looking to implement technology products
    • Cognistreamer: a collaboration platform for external and internal stakeholders to collaborate. Enables enterprises to crowdsource solutions to problems
    • Storybook: a SaaS-based platform used by enterprises to understand how their customers move through their offerings.
  • Digital Factory Layer: these are the capability modules within the wavespace centers:
    • Research lab
    • Design studio
    • Innovation hub
    • Showcase
    • COE
    • Delivery center.  

Examples of how BFS clients are engaging with wavespace include:

  • Citibank Canvas: Canvas is a crowdsourced beta testing community established to improve customer experience. Since the inception of Canvas, Citi has experienced an 11% increase in brand favorability
  • Global universal bank: uses the research lab to continuously monitor customer sentiment and CUX best practices
  • Global retail bank: long-term use of wavespace to transform processes in trade finance, F&A, CUX, capital and profitability, Finlab, data management, and analytics. The bank is using wavespace to digitize its $17 Bn legacy operations platform investments. 

EY’s vision of digital transformation is focused on effectively bringing together large ecosystems of participants to solve enterprise challenges. EY has built its wavespace center offering to coordinate bringing the right participant at the right time into a workgroup. Clients who have engaged with wavespace have typically returned with ever larger engagement remits, as the growth in the centers and engagement activity demonstrates.

EY has been wise to maintain a narrow product focus (e.g. platforms such as SAP) and narrow client focus (large enterprises). Other vendors have set up sandbox centers like EY’s wavespace, but they retain sole or dominant presence in their centers. EY has taken a bold step, aggressively opening its centers to third-party participants. EY’s business model is moving from labor-based delivery services to orchestrator of services delivery. However, wavespace’s continued success will require maintaining managerial effectiveness over third parties who are outside of traditional control mechanisms.

<![CDATA[WNS Targets Mid-Tier Enterprises to Co-Create Digital Transformation]]>


I recently attended the WNS influencer conference in New Orleans, the theme of which was 'Co-create to Outperform’. WNS believes that the marketplace understands what transformation means for their businesses, but the challenge is how to achieve this vision. WNS’ view is that, for transformation to be effective, it needs to be customized for the client with their full participation in the co-creation process. The conference presented many examples of how a ‘two-in-a-box’ engagement was able to identify and implement an effective solution to a challenge which delivered both very high savings and high satisfaction.

Client feedback

WNS presented seven clients who outlined their engagements and why they chose WNS, with several key themes emerging.

All clients referenced:

  • WNS enjoys very high client retention. Each client presenter had worked with WNS for multiple years and several were clients for over 10 years
  • Culture fit is very important and a key to WNS’ success
  • WNS is a vendor who works with clients across a wide range of sizes including middle market enterprises. In the banking industry WNS focuses its services on financial institutions with assets from $50 Bn to $200 Bn. Banking industry clients present stated they preferred WNS because they were important to WNS at their size.

Most clients referenced:

  • A focus of WNS’ work with clients is SCM/F&A
  • Delivery model included WNS as manager of multiple third parties (‘one throat to choke’)
  • Many engagements required the move from ‘tribal knowledge’ to standard operation procedures, without antagonizing the client’s people or culture
  • WNS was introduced to them by word of mouth from satisfied clients. For example, two clients  had not initially included WNS in their RFPs because they reached out to ‘the usual suspects’ for proposals. When the proposal process was not progressing satisfactorily, WNS was drawn in at a late date to bid due to a referral based on a successful engagement of the same scope and focus. During the bidding process, WNS turned out to be an exact fit for their needs.

Client example: regional bank

A northeast U.S. regional bank provided an example of WNS’ engagement style and benefits delivered. The bank began its relationship 12 years ago, when it was looking to improve its operational efficiency by moving some processes offshore. Over time, the relationship has grown due to:

  • Cultural alignment: the bank places a high value on interpersonal relationships. It operates in close-knit communities where the standard of interaction is high support for the customers and communities. WNS is comfortable working without reference to a contract, once it has been signed, and without change orders, unlike other vendors. It has also enabled WNS and the bank to co-create solutions to improve processing efficiency   
  • Flexible staffing model: WNS has been willing and effective at flexing staffing levels as volumes swing, including when there have been unanticipated volume swings
  • Periodic process reengineering: WNS has identified process reengineering opportunities and fulfilled the technical work to implement those changes. The bank is a frequent acquirer of other banks, which provides a steady flow of these opportunities   
  • Robotics: RPA is difficult to implement effectively. WNS has been effective at co-creating with the client to build and implement RPA solutions which meet and continue to deliver the business objectives the initial business case envisioned.

The example the bank presented was of an RPA implementation to capture information from legal documents. The bank had hired a consultant who identified the opportunity and built the business case. The consultant intended to implement the RPA solution, but the project failed to move forward. The bank called in WNS who took over the project and, working with the client, co-created the final automation solution, including implementation. The department previously processed these documents manually, with an annual budget of $750k. Currently, the department is processing these documents for $329k per year, a cost reduction of 56%. When the system has fully matured, the anticipated cost reduction will be 67% of the annual budget. The bank summarized the relationship benefits as: their investments into the relationship, the quality of work delivered, and the cultural fit.

The WNS approach

WNS’ approach to digital transformation for the banking space targets an underserved market, medium-sized financial institutions, to transform manual-intensive processes into automated processes. WNS works with these clients to create solutions customized to support the client’s differentiated value proposition in the market. Few vendors are willing or able to apply resources to middle market or regional engagements that create customized outputs. This allows WNS to apply its domain knowledge, which is embodied in its employees based on their industry experience, to solve operations challenges to drive outcomes relevant to industry and market-specific requirements.

WNS has been wise to maintain a narrow process focus in each industry. Execution is critical to a project’s success, especially so with RPA engagements (where, post-deployment, most RPA deployments increasingly lose effectiveness due to poor bot oversight). In addition to clients in the audience, there were prospects who are considering RPA engagements with WNS because of poorly performing RPA engagements with existing vendors.

<![CDATA[Infosys’ Model for Delivering Differentiated Digital Skills]]>


I recently attended the official opening of Infosys’ design center in Providence, Rhode Island. In 2017, Infosys committed to hire 10k workers in the U.S. by 2022. Part of that commitment is a plan to open six training and delivery centers across the U.S. intended to provide benefits including:

  • Partnering with local colleges who have specific capabilities such as design education, which are critical for delivering digital services to enterprises, but in short supply with existing workforces
  • Delivery centers for these skillsets which can work closely with regional and national enterprises to address legacy processes which have been a challenge to address using offshore delivery
  • Creating a more intimate relationship with Infosys clients from onshore.

The six centers Infosys committed to build are:

  • Indianapolis, Indiana: target 2k workers by 2022
  • Raleigh, North Carolina: target 2k workers by 2021
  • Hartford, CT: target 1k workers by 2022
  • Phoenix, AZ: target 1k workers by 2022
  • Richardson, TX: target 500 workers by 2022
  • Providence, RI:  target 500 workers by 2022.

A closer look at the Providence center

The Providence center was officially opened on February 12, 2019 but has been operating since summer 2018. Its initial client is a major bank. The center was initially established with a partnership between Infosys and Rhode Island School of Design (RISD), a leading school for industrial design located a few blocks from the center. RISD was ranked number one in 2015 and 2016 for graphic design, printmaking, and industrial design by QS World University Rankings. The partners are contributing:

  • RISD: coordination of course development with Infosys, classroom instruction, and student placement services into the center and Infosys workforce
  • Infosys: identification of relevant work skills required, internships, and jobs for graduates.

To date, the center has hired 100 employees (ahead of plan). Half the hires are from RISD and half are from Community College of Rhode Island (CCRI).

At the opening, Infosys and CCRI announced a partnership which committed each organization to work to train and employ CCRI students in relevant design technology skills. The impetus for the partnership is that community colleges teach 50% of the college level students in the U.S., but these graduates obtain relatively few job offers relative to their numbers. By providing relevant work experience, Infosys and CCRI expect to increase the rate of job search success for these graduates. To date, Infosys has found that the CCRI students have a higher level of job performance and morale than their typical employees. The partnership uses the DEAL (Digital Economy Aspirations Lab) as its development venue, where students learn, in a corporate environment, skills that are immediately relevant to Infosys and other employers. In addition, DEAL will sponsor two joint task forces:

  • Identifying entry-level roles suitable for community college students across industries, and creating paths to move into those jobs
  • Articulating the value of these experiences to four-year colleges so that students can receive credits from those colleges to apply towards four-year degrees.


Skills to deliver digital technologies are in short supply globally. A key value of digital technologies is the ability to engage people much more effectively. Infosys has taken this challenge and built a differentiated center focused on industrial design technology implementation for its existing clients (mostly tier one global enterprises). It has built the center next door to one of the top colleges in the world for industrial design. By working with local colleges Infosys is able to ensure that skills are learned which are immediately relevant to the work required by Infosys’ client engagements. Industrial design is fundamentally a creative process, which means each worker is a unique asset. The colleges identify students who have the capability to succeed in creative work; Infosys then works with the school students to develop relevant skills. The result is a differentiated design capability created in Infosys’ workforce.

The next decade will see a rapid growth in demand for industrial design capabilities across industries, as 5G, open banking, and omni-channel delivery infrastructure becomes operational. As data and channels grow, customer engagement will become the critical differentiator for successful enterprises. Creating a workforce with advanced design capabilities at scale is necessary to capitalizing on this new environment. This center is a first step in the industry to shifting the ITS proposition to differentiated delivery.   

<![CDATA[5 Key Growth Segments for Banking ITS & BPS in 2019]]>


The banking industry cycle has turned towards austerity for 2019 as indicated by recent events, including:

  • Labor cost cutting: State Street announced 1.5k executive layoffs, and Santander will close 20% of its bank branches in the U.K. Both are part of long-term trends incurred by automation and the shift to omni-channel delivery  
  • M&A activity: Cost pressure is driving banks to sell their operations centers to third-party services vendors. For example, in the past month, Cognizant acquired the operations of three Nordic Banks which were joined into one vehicle, Samlink. Also, long-time banking operations industry consolidator Fiserv acquired First Data, a payment processing services and solutions vendor, to increase its scale in payments
  • Tightening financial conditions and slowing of economic growth: U.S. Fed and other central banks raising interest rates, and slowing economic growth in the U.S., China, EU, and U.K. 

These events underline conditions where the financial services industry will face slower revenue growth and will need to aggressively reduce costs to remain profitable. Because of this, we expect 2019 to be a strong year for banking outsourcing, with banking ITS and BPS markets growing as fast in 2019 as in 2018. Below I identify five key growth areas for 2019.

IT outsourcing

Banks are merging or selling unwanted branches and lines of business, and this trend will continue until the next recession. M&A will drive IT outsourcing deals, as banks look for temporary labor to integrate targets quickly to realize efficiency benefits.

Core banking platform expertise will be key to winning deals, but digital technologies will be required to support the agility needed to cost effectively reengineer the operations of both the acquiring and acquired banks. Currently, Europe is showing the highest level of activity in this area. Later in the year we expect the U.S. to accelerate. Asia will remain a laggard in this area over the next year.     

Open banking

In 2019, open banking will take off, due to regulatory deadlines requiring go-lives in 2019, as banks look to monetize their assets. Open banking is the concept whereby banks open their platforms to third-parties for them to transact business with the banks’ customers and suppliers. And currently, banks are playing with business models, pricing schemes, and target customers.

The banking industry provides no direct comparable offerings to guide banks looking to monetize open banking assets. Setting up a business will require significant investment in security and vendor quality controls before the first dollar is made. Expect there to be many missteps along the way. ITS vendors working on infrastructure enablement will be the ones to make money in 2019. We expect interesting ideas to come to the fore from 2020 onwards. It will take five years for successful business models to take root and consistent earnings to start rolling in.

Automation & AI

RPA and AI implementations have been growing rapidly for the past three years and will continue to do so in 2019. Key initiatives for 2019 will be for services vendors to improve their use case development and create the ability to manage RPA bot groups.

RPA use cases do not make their cost projections over 60% of the time when deployed in POCs. Development of use case libraries and improved analysis is mitigating, but not eliminating, this challenge. Vendors are now repurposing successful use cases across clients and geographies. 2019 will need to be the year where vendors and banks consistently identify winning use cases prior to POC deployments. Vendors who succeed in this challenge will be able to deliver much higher return on engagements for their clients. 

Management of deployed bots has been a significant challenge for banks and vendors. By integrating AI into controller bots, vendors can increase the uptime and effectiveness of bot teams. Where bots operate 24/7, it is more effective to automate the management than to have humans managing with shift handoffs.

Cloud delivery

Banks are finally willing to aggressively make the transition to cloud delivery. Currently, the primary venue for cloud is on-premise. However, to achieve aggressive cost takeout under conditions of rapid IT infrastructure/application change, it requires external cloud delivery from a shared environment.

Banks are grappling with redefining the internal/external operations split. In 2019, banks will articulate what needs to remain internal (high value, non-repetitive processes) and what can be delivered externally (low value/less differentiated processes). Operations will still need to integrate these two types of processes effectively. Cloud delivers high cost savings, but on a small operational footprint. Enlarging the operational footprint is the highest cost saver and will be undertaken by successful banks this year.   

Transaction processing management

Banks will focus on transaction processing management. Regulations requiring real-time payments have led to new regional platforms which deliver instant payments, including NPP in Australia, RTP in the U.S., and Instant Credit Transfer scheme. Now banks need to understand and manage these high-speed transactions within their internal operations. Banks will deploy AI to achieve better, more efficient processing of transactions. The AI will need to pull and process data in real-time to stop unwanted transactions and report suspicious ones. And because the transactions are between counterparties, banks will seek third-party IT services vendors to support processing and coordinate across counterparties.

<![CDATA[Wipro Drives Digital & Automation Growth with 4 Big Bets]]>

The primary purpose of Wipro'ss Digital & Big Bets Analyst Relations day in Boston at the end of November was to outline its digital and automation strategy, including presenting some startup partners Wipro is working with (and has invested in through Wipro Ventures) to help drive forward this strategy. Wipro believes its key technology bets will enable it to help clients reinvent their businesses as digital businesses.

Here I take a look at Wipro’s four ‘big bet’ initiatives, with examples from the financial services industry, and provide feedback from two of Wipro’s startup partners.

The four big bets

Wipro has selected four key areas as its big bets:


Its digital big bet is around the application of technologies and methods to human interaction, especially customer contact. Wipro presented a case study of a mortgage lender whose legacy mortgage origination process was long, complex, and difficult to navigate for originators and borrowers. The result was a very low conversion rate for borrowers who started an application.

Key components of the solution were mapping processes, bringing in stakeholders to discuss challenges and preferences, designing an improved customer journey, and implementing the platform. The result was improved NPS and conversion rates.


Cloud delivery is a foundational bet which underpins all of Wipro’s automation initiatives. Wipro presented a case study of a major financial data provider which used an inflexible legacy platform for its data services business. The platform was inflexible, costly, and operating on aging infrastructure.

Wipro was able to re-platform the legacy apps to AWS while doubling memory and servers. AWS delivery enabled improved BCDR. The result was a 64% reduction in OPEX and a one-year payback.  


Here, Wipro emphasized the importance of making it simpler and easier for clients to manage their cyber risks. Currently, Wipro has ten platforms and is increasing the number of partners it works with to address this ongoing challenge. With reference to the Equifax breach, Wipro stressed that the most important feature of cybersecurity is not to perfectly secure the environment, an unattainable goal, but business continuity after a breach (with continuity requiring minimization of operational losses and trust with stakeholders). It stressed that setting client expectations, using the latest techniques, and providing customers with high levels of transparency are the key elements.

Industrial and engineering services

Here, Wipro is helping clients design products, improve them, and bring them to market. This is typically applicable to manufacturing clients, not financial clients.

The viewpoint from Wipro’s startup partners

I interviewed representatives from two startups Wipro has invested in, both of which are security vendors with large financial services client bases. They spoke to the value of the Wipro relationship and how they deliver value to clients:


Demisto is a security orchestration, automation, and response (SOAR) provider. 25% of their clients are F500 companies, including tier one banks and payment processors. Their platform has three key elements:

  • Case management and tracking tool
  • Automation to accelerate response time
  • Real-time interactive investigations using machine learning based on analysis of actions, not data.

Demisto said that it benefits from the Wipro partnership due to:

  • SI and IT staff who are familiar with their technology and can integrate it into client environments
  • Increased sales opportunities in multiple geographies and industries where they have not previously been working. Currently, the partnership accounts for a significant percentage of overall revenues at Demisto, up from zero two years ago.


Tricentis is a vendor of automated software testing services for DevOps. They target tier one companies, including large financial institutions. Testing is provided for UI and APIs on the web and mobile systems. Tricentis uses a partnership model for testing delivery, and partner organizations generate 50% of its revenues. Wipro has partnered with Tricentis for 14 months and now has several thousand testers trained in the Tricentis toolset. Over the past year, Tricentis’ revenues have doubled due to its partnering strategy. Over the next few years, Tricentis will focus on testing SAP applications in preparation for the 2025 SAP move to HANA.    


Wipro is using the cloud to help tier one clients with ponderous legacy systems to become more agile and reinvent their business models. The challenge of a cloud environment is increased risk of cyberattack. Avoiding a cloud environment partially mitigates cyber risk, but not enough to overcome the cost and agility disadvantages of a legacy environment. Investments in cybersecurity are made to better manage the cyber risk that comes with cloud delivery and, more importantly, do it in a transparent way that maintains and improves customer confidence in Wipro’s services.   

On top of the cloud and cybersecurity platform, Wipro is investing in digital services to support client revenue growth. Financial institutions cannot focus solely on cost-cutting; they need to drive revenues to build a sustainable business model. Promoting positive customer engagement using digital services is driving client revenue growth. Enabling these capabilities requires emerging technology products which Wipro delivers via product investments and partnerships. The partners I met have experienced rapid revenue and customer growth because Wipro’s clients are demanding automation services, and Wipro is recommending and staffing the delivery of those solutions.

None of Wipro’s big bets are final solutions, but rather approaches with no final form. The final goal is flexibility to adapt to an everchanging environment at a significantly lower cost than previously possible (50-80% lower cost versus the previous 20-35%). While most digital competitors are pursuing the same goals, the sheer scale of partnerships, client engagements, and internally allocated resources demonstrates Wipro’s commitment, and the number of engagements executed to date validates Wipro’s initiatives so far.

<![CDATA[NIIT Tech: Tight Focus Key to Successful Banking Services Strategy]]>

The recent NIIT Tech (NIIT Technologies Ltd.) analyst conference was an opportunity for the current administration, most of whose executives have been at the company less than 18 months, to discuss their strong business success. FY19 (ending March 31, 2019) has so far added 19 new clients. The BFS industry sector added four large clients.

NIIT Tech has accelerated its growth under CEO Sudhir Singh, growing revenues 23.1% in Q2 FY19 y/y, with net profits up 66.3% y/y over the same time-period. This has been accomplished by focusing on a limited set of high-priority areas:

  • Industries – focused on three industries (BFS, Insurance, and travel). The BFS strategy is to focus on advisor engagement in the wealth and asset management sub-segment of the BFS industry and, to a lesser extent, on core platform transformation in banking
  • Digital technologies/service lines – focused on the use of emerging technologies in legacy environments (digital, data and analytics, cloud, automation/AI/blockchain, and cybersecurity).

Key examples of delivery within NIIT Tech’s focus areas include:   

  • Digital –  digital advisor portal primarily for a large asset management client; supporting over 7k wealth advisors and $64bn AUM.
  • Data and analytics – organizational analytics for a tier one bank; analysis of mortgage broker sentiment to prioritize loan origination cases
  • Cloud –  platform transformation to cloud with BankingEasy on Azure for 19 local Indian banks; managed platform service for 200 financial services clients
  • Automation/AI/Blockchain – RPA for 26 processes in retail and W&A; RPA and AI for a tier one U.S. bank to optimize back-end processing; application development and support for multiple FIs.

NIIT Tech uses third-party software for its solutions, but delivers its services using proprietary frameworks and tools. The primary proprietary framework is TESS, which it uses to identify the best opportunity processes for automation and deliver the implementation engagement. If clients do not want a retained automation environment, NIIT Tech provides TESS, its robotics-as-a-process offering. NIIT Tech has found, consistent with our research across vendors, that selecting the right process for automation, especially in RPA, is the major determinant of project success as well as the level of value delivered. 

Core platform transformation is delivered leveraging of NIIT Tech’s proprietary TRON smart automation platform, which provides cognitive solutions for business processes, IT processes including QA and DevOps.

Clients I have spoken with indicate NIIT Tech’s tight focus has helped them decide to start and expand engagements to drive digital enablement internally. Because NIIT Tech’s parent is the largest IT training organization in India, it is able to train and provide the required number of qualified staff to deliver digital engagements (while most clients and competitors find it very difficult to find staff with relevant qualifications in these high-demand technologies). NIIT Tech has sufficient backlog to continue its rapid growth for several years. However, its delivery will need to remain relevant to new local countries as it expands its footprint across geographies.   


I am researching RPA and AI services in BFS for my next market analysis project this winter, delving deeper into adoption challenges and the opportunities these technologies provide to banks. 

<![CDATA[Infosys’ Digital Services Strategy for Banking & Financial Services]]>

I recently attended the Infosys Confluence event in California to look at the vendor’s activities in banking & financial services (BFS). Here are the key takeaways.

Under its current CEO, Infosys has taken a new software-agnostic approach to digital business, which is yielding results. Infosys has proprietary platforms, including Finacle, for core banking and NIA for AI. However, Infosys’ primary clients in financial services, tier one global banks, have legacy platforms they are unwilling to replace and digital solutions they have decided to standardize on for future implementations.

For Infosys, the software-agnostic approach means they structure their services to enable plugging in any solution the client prefers, enabling it within an IT ecosystem that will meet the business objectives of the client. To achieve that goal, Infosys has developed Digital Navigation Framework, which it announced at the conference. The five components of the framework are:

  • Design +: digital design services to improve customer experience. Infosys has acquired several design agencies including Wongdoody and Brilliant Basics to enable these skills and is expanding its capabilities with a design center in Providence, RI in partnership with Rhode Island School of Design and studios across the globe: Seattle, LA, London, Amsterdam, Berlin, Dubai          
  • Proximity +: localization strategy to enable closer work with client teams onshore and increase training to scale the workforce in scarce digital skills. Infosys has invested in two innovation hubs (Indiana and Raleigh), education & training centers and digital studios to not only cater to client requirements but also train the workforce
  • Agile +: Infosys has invested $100m in agile development technologies, including the creation of its DevOps platform. Infosys enables clients to undertake agile software deployment projects using the DevOps platform, open source software, reusable digital templates, and its large library of APIs
  • Automation +: Infosys is helping clients navigate their AI and RPA journey through its in-house platforms – NIA and AssistEdge, in addition to partnerships and competencies across the best in class industry platforms/solutions  
  • Learning +: training to create and maintain the digital services skills required to deliver large-scale digital projects (which are in short supply in the marketplace). Infosys is advancing its localization initiative, announcing a new technology and innovation center in Arizona which should house 1k employees by 2023. Offerings delivered from these centers include:
    • Training of college students in partnership with schools to develop relevant skills leading to digital services jobs at Infosys or elsewhere
    • Retraining of Infosys employees with relevant skills for new types of Infosys engagements.   

Infosys has applied these principles in North America with its BFS clients who, over the past year, have reduced spending on compliance and redirected funds to digital enablement initiatives. Over the next twelve months, the banks intend to take monies from tax savings under the new tax law to drive forward more digital initiatives.

Infosys emphasizes that success in digital enablement requires prior experience working with industry legacy platforms. In the mortgage industry, 97% of loan servicing platforms are from a single vendor, which limits the level of value creation possible. But in origination, due in part to the wide variety of platforms in use, large efficiency gains are possible. In one recent engagement, Infosys enabled a legacy platform to automate most of the data management and the client was able to reduce headcount by 58%.

During the past year in North America, Infosys has added two new retail banking engagements (one a new logo and the other an existing client), both large contracts for mortgage lending services. The contracts rely on Infosys’ state mortgage licenses (currently 44 states) which allow their employees to support the client in regulated processes. Ramp-up has been rapid with over 55 FTEs added in the last twelve months.

There are, of course, challenges: I talked with one client who has been working with Infosys on several RPA POCs, where there was a challenge in integrating bots into the legacy platform to deliver targeted benefits. Successful RPA solution selection requires the client/vendor to balance tradeoffs between:

  • Cost: industry standard RPA solutions (e.g. Blue Prism, Automation Anywhere, UIPath) cost significantly more than services vendors’ RPA solutions (e.g. AssistEdge) 
  • Functionality: industry standard RPA solutions have more robust functionality and product development roadmaps than RPA solutions from services vendors
  • Legacy platform: integrating bots into a legacy platform is challenging if the underlying software is incompatible. Therefore, banks with successful RPA programs have decided to standardize on one RPA vendor.    

Once the solution has been selected, successful implementation requires:

  • Setting up a test environment: identifying the apps in the core platform which will need to work with the RPA solution. Set up a test environment which matches the production environment the final solutions will operate in
  • Specific to mortgage operations: as mortgage operations is a document-intensive environment, successful RPA solutions require high capacity data extraction tools with AI functionality to manage both physical and electronic documents.

All the Infosys clients I have spoken with remain confident in working through startup RPA programs, or are glad they stayed the course where they have successful RPA programs. 

I will be researching RPA and AI services in BFS for my next market assessment this fall, delving deeper into adoption challenges and the opportunities these technologies provide to banks. 

<![CDATA[Virtusa’s Open Innovation Platform: Enabling Curated Access to FinTech Vendors]]>

This is the latest in a recent series of blogs on open banking, which is likely to become the biggest driver of change in the banking industry since double-entry bookkeeping swept the industry in Genoa during the 1300s. I recently talked with Virtusa’s xLabs, a digital innovation hub within Virtusa, about their approach to open banking and what their roadmap is for the future.

Open Innovation Platform

Virtusa xLabs believes a successful open banking environment will require rapid, successful, iterative innovation by banks and FinTechs. However, the inhibitors to innovation include:

  • Lack of feasibility of some ideas: low idea maturity or lack of compatibility with legacy systems   
  • Ineffective matching of ideas to the bank’s main business problems and funds
  • Ineffective partnerships with other third-party innovation providers
  • Poor user/revenue value due to lack of validation systems or awareness of technologies.

Virtusa xLabs has built its Open Innovation Platform (OIP) composed of three elements to reduce the impact of the last three inhibitors (funding, partnerships, and value) and allow individual innovators to focus on addressing the first of them (feasibility). OIP is composed of vendors providing:

  • Idea management tools that can help with idea management, but not idea execution (e.g. Brightidea, Spigit, Wazoku)
  • API management tools: technology providers providing non-industry specific integration tools and services (e.g. Mulesoft, WSO2, and ProgrammableWeb)
  • FinTech curators/matchmakers: news providers/aggregators (e.g. MEDICI, CBInsights, Plaid, and

The OIP provides access to these resources to allow banks to convert an idea into an MVP in a few weeks rather than months. The effectiveness of the OIP relies in part on scale. Currently, the OIP’s scale of offerings include:

  • API bundles: 200+ internal and FinTech APIs. APIs are categorized as:
    • Mock APIs: used in tests to determine if a concept works
    • Smart bank APIs: light APIs with no deep logic to use available data for analysis
    • Core banking system: APIs which can be used to test technology’s impact on an entire process and all dependent processes within a core platform  
  • FinTechs: ~10k vendors cataloged by capabilities
  • LOBs: 106 tables by LOB in the sandbox
  • Investment and Trade LOB: data generation currently underway in xLabs’ AWS environment
  • MVP/CVPs: 25+ completed
  • Test bed: 10m customers and 40m transactions.

Virtusa xLabs supports clients using its OIP with four services:

  • Problem identification: what are the credible use cases specific digital technologies can be applied to solving, and what technologies (at what level of maturity) are available from what vendors?
  • Rapid project starts: the ability to set up a cloud-based platform to commence work without sharing sensitive data before a final contract signing with FinTech vendors. This allows faster project starts and completions
  • Shared practices: an internal community portal to share best practices and reduce redundant processes for non-differentiating processes. Currently, there is a KYC internal community
  • FinTech marketplace aligned to countries: facilitates vendor selection based on relevant domain expertise. FinTechs are categorized as:
    • Disruptive: Tier 1 banks use these FinTech vendors to support disruptive business model change
    • Catchup: Tier 2 banks use these FinTech vendors to support them in catching up to tier 1 banks regarding functionality and operational efficiency
    • Basic enablement: Tier 3 banks wanting to establish a digital presence face access challenges based on their legacy infrastructure. FinTechs focused on these issues provide COTS FinTech enablement for legacy environments.

NelsonHall perspective

FinTech has been slow to achieve its promise due to several factors. Experimentation to date has been active but ineffective, and most POCs do not meet their business case. More effective synthesis of domain expertise with technology should improve project conversion to useful operational change. And improving a bank’s ability to evaluate and select technology vendors will improve the rate of successful project generation and reduce the cost of achieving success. In addition, sharing best practices for non-differentiating processes will release industry funds to pursue disruptive opportunities, which require long development cycles and large resource commitments.

Virtusa’s OIP is creating a scale community where participants can not only find each other, but the OIP helps participants effectively search for the ‘best fit’ partner. Over time, Virtusa xLabs will need to move the focus of the OIP from accessing a wide range of technology vendors to fewer vendors with a greater domain focus on a few key geographies and business cases.

As FinTech offerings become more mature, technology vision will become less important than business execution. Currently, Virtusa seems to be developing a focus on reg tech, payments, and deposits, which are the core of retail banking. These processes require heavy customization by country and must be executed at high volume and low cost, just the type of processes that need disruption if banks want to remain effective in a digital world.  

<![CDATA[TCS Takes Agile Value Stream Approach to Bank Enterprise Transformation]]>


I recently attended the TCS Business 4.0 conference in Boston to understand TCS’ latest developments in the BFSI sector. Here are the key takeaways.

BFSI represented 32.5% of TCS’ Q2 2018 revenues and generated $7.7bn in revenue over the latest twelve months. TCS reports 20% of BFSI revenues are derived from its digital offerings, with BFSI clients adopting digital technologies and services at a pace which is expected to accelerate over the next few years. TCS surveys of its own BFSI client base indicate 44% of banks intend to implement open banking capabilities in the next three years and 75% of banks expect to operationalize some form of blockchain platform by 2020.

Digital demand shift from B2C to B2B use cases

Over the last 12 months, TCS has seen a shift in BFSI client demand for digital services from B2C use cases (including digitalization of the customer experience and expanding the range/functionality of omni-channel engagement) to B2B use cases, which include:

  • Capital markets adoption of digital technologies to support wealth advisors and investment managers
  • Exchanges facilitating experimentation with new security types at lower cost, or B2B data management across independent organizations and compliance
  • Blockchain experiments, which are finding highest adoption among large-scale ecosystems including exchanges and tier one global banks, which have communities with very high numbers of participants and transactions.

TCS is delivering these services using its Machine First Delivery Management (MFDM) network. Increased automation through MFDM helps to increase delivery predictability by reducing error rates, but requires the rearchitecting of the workforce structure, skills, and methods to increase delivery collaboration and agility across TCS’ Global Network Delivery Management (GNDM).

Workforce training has been critical to TCS delivering an agile skilled workforce. It has trained 235k employees on agile work methodologies, 67k agile practitioners, 11k agile certified, and 380 Ninja coaches. This training has resulted in 1.5k agile engagements, 80+ transformational programs, and ~100 large-scale agile adopter clients. TCS claims 20% productivity and 100% process velocity increases where it deploys agile techniques.

A value stream approach to innovation

To support client process innovation, TCS has shifted its operations delivery approach to a value stream orientation. This engages with LOB and operations executives to simplify processes and undertake “risky” processing innovation in the context of business value streams, not operations delivery processes.

Businesses have always competed on price, quality, and speed. Today, digital processing increases the value of speed, making it the prime differentiating characteristic in financial services. This requires transforming operations by failing fast and adopting new IP and procedures as needed. In the past year, banks have changed their buying requirements in the following ways:

  • From lowering operational risk to mitigating operational risk required to meet business goals
  • From single-site location of operational resources for scale economies to multi-location, coordinated delivery to achieve scale economies
  • From development methodology to enterprise transformation methodology
  • From tactical adoption to operations model transformation
  • From humans executing tasks with machine support to humans coordinating machine execution.

Case studies

TCS illustrated the benefits of agile transformation with a case study of a large European bank for whom it provided cloud DevOps, unified collaboration, and multi-shoring services across 65% of the bank’s platform landscape. It involved ~160 agile teams, and 1.5k associates. The key benefits included:

  • Time-to-market reduction: 30%
  • Cycle time reduction: 80%
  • Faster deliver: 30%.

Another BFSI case study focused on business disruption. A major global asset manager (that did not have a personal advisory business) wanted to enter the wealth advisory business with a focus on the mass affluent marketplace. Key differentiators in wealth advisory are quality of advice and price. The challenge was to create a scale business while maintaining a focus on individual customers. The scope of engagement covered two key business activities with robots and advisors working together:

  • Customer acquisition:
    • Robot: customer data acquisition, needs analysis, and portfolio construction
    • Advisor: disclosures, modifications, and strategy approval
  • Customer sustenance:
    • Robot: periodic reviews, event-triggered changes, rebalancing, and cash-out activities
    • Advisor: cash-in events, life events, and strategy/portfolio changes.

The wealth advisory business has been successful, as evidenced by:

  • Growing the mass affluent business to $112bn AUM by mid-2018
  • Service fee price points of >= 0.3% of AUM, with satisfactory business profitability
  • Hybrid human/robot advisory model working effectively.
<![CDATA[TCS: Advances in KYC Processing Require a Comprehensive Approach to Data Management]]>


Since the financial crisis, regulators have been tightening the KYC processes banks are required to undertake. Enhanced KYC requirements have been applied across many regulations, including MiFID, PSD2, and ultimate beneficial ownership requirements (U.S. CDD Rule). And, as compliance requirements have increased, banks have spent increasing amounts of time and resources on addressing operational delivery of KYC.

NelsonHall estimates the costs of KYC compliance has increased tenfold over the past decade, and by an average of 26% per year. Yet, despite efforts to standardize approaches and share overhead for KYC activities, financial institutions to date are pursuing a wide range to approaches to addressing KYC compliance. I spoke recently with TCS about its initiatives in delivering KYC services to financial institutions.

TCS’ KYC initiatives

TCS has a large KYC practice with 3K employees, which is part of a larger 6K employee customer onboarding practice. Its clients are tier one financial institutions primarily based in the U.S. APAC, Europe and the U.K. Key domains discussed include:   

  • Data management. As banks expand their target customers and markets, TCS provides recommendations to clients on:
    • Automation in data acquisition: in collaboration with relevant data vendors, adoption of intelligent automation techniques and a set of decision tree rules to facilitate the shift towards dynamic KYC
    • Enrichment of data, including managing the effects of data update cycles for various vendors, data quality by source, and application of best practice AI to data, which can improve data quality and reduce data discrepancies (often found at above 5% level across data obtained from multiple sources)
    • Data distribution, including applying full or partial KYC updates to silos across the bank which enable reuse of KYC data across multiple regulatory compliance requirements.
  • Pricing. Vendors I have spoken with, including TCS, are willing to move to transaction-based pricing, but clients continue to select FTE-based pricing due to their negative view of current cost of operations for bundled services. Tier one clients have indicated an interest in moving to alternative pricing models, but the corporate culture will need to change first  
  • Ecosystem. Banks do not want to manage a large ecosystem of IT vendors. Technology is advancing, with many new vendors emerging to support improved KYC processing. The key to success of a vendor ecosystem, in TCS’ view, is the flexibility and service orchestration frameworks which can integrate multiple solutions to commit to the desired outcomes 
  • Blockchain and regional utilities. Banks are not ready for the coordination required to develop these types of cooperative facilities; the core reason remains each bank’s customization of its processes. Internal coordination of such facilities, across a bank’s LOBs, is the likely first use case. TCS is currently working on POCs with several clients for internal blockchain and utility facilities. 

The broader KYC picture

Despite claims that the industry is automating and digitalizing KYC processing, industry experience clearly shows that STP or shared services remain a distant goal. Key achievable steps towards that goal include:

  • Automated data management across silos: when an event in one bank silo triggers a KYC update, the process updates KYC information across all bank silos
  • Intra-bank sharing of best practices and overheads is achievable, but inter-bank sharing will not currently work 
  • Increasing the level of standardization of KYC frameworks and processes will prepare banks for standardized pricing methodologies and shared environments. Banks are not currently interested in transaction-based pricing or industry consortia for shared standards or services
  • Vendors are promoting technology vendor ecosystems to bring solutions to banks. Successful ecosystems maintain open interfaces because banks want point solutions included which they have vetted previously and have chosen to standardize on
  • KYC is moving from a calendar-based refresh cycle to an event-based refresh cycle. To successfully conduct frequent refreshes requires:
    • Automation of data pulls and analyses to mitigate the cost of frequent processing
    • Effective placement of data findings across silos (e.g. placing customer nationality data in product silos across the bank).

Vendors are moving ahead with automation and AI services to enhance KYC and reduce the cost, but the banks’ siloed structures remain an impediment to rapid change. 

<![CDATA[Mphasis’ Strategy for Financial Services Business Growth]]>


NelsonHall recently attended Mphasis’ analyst summit in Foxboro, Massachusetts. Key takeaways are that the company is now focusing on digital and cognitive services applied to legacy systems, and on geographic expansion, specifically in North America and continental Europe.

Mphasis is leveraging its industry experience, including BFSI, which accounts for ~75% of revenues, to drive engagements which integrate domain-based insights to core platforms to improve sales and efficiency. These initiatives have led to four quarters of above industry average revenue and margin growth, and here I look in more detail at how Mphasis is growing its BFSI services business.

Change in ownership

Mphasis experienced declining revenues from FY Q2 2013 to FY Q2 2017, averaging 1.4% per year. In FY Q2 2017 (late calendar year 2016), Blackstone bought a majority stake in Mphasis from HP. Since then, quarterly revenues have grown at 4.5% year over year. Management attributes the performance change to the ownership’s commitment to digital technology services and business growth. This has enabled Mphasis to both invest in technology services and build technology partnerships.

We agree the new ownership has increased investment in technology, but Mphasis has also leveraged its existing investments and expertise to drive revenue growth. Specifically, Mphasis is aggressively selling into its ecosystem. Two key channels are helping grow sales:

  • Digital Risk (12% of revenues, acquired in 2013, sells mortgage BPS): Mphasis has focused on origination services, a key pain point for lenders looking for cost reductions
  • DXC channel: Mphasis has focused on existing client relationships, with an emphasis on banks using legacy Hogan core banking platforms (of which Mphasis has extensive experience, including modernizing and modularizing Hogan into the Celeriti offering).

Mphasis has shifted its offering segmentation strategy from functional segmentation to micro-industry segmentation, such as loan origination. This allows Mphasis to focus on LOB challenges and deliver services which connect the customer (engagement layer) to legacy systems (intelligence layer). Solutions are often transferred to the cloud to reduce the cost of run and change.

Mphasis’ Front-to-Back transformation approach

Because technology and the industry are moving very fast, Mphasis counsels its clients to consider its investments as disposable, not permanent. Mphasis builds disposable software architectures in its engagements to facilitate rapid adaptation and replacement as technology moves along. Mphasis delivers these changes quickly in small chunks to allow timely deployment and quick value realization by clients. Mphasis calls this strategy Front-to-Back (F2B) transformation. Mphasis will announce this rebranding in the Fall of 2018 as “The Next Applied”, which focuses on Mphasis applying technology to business challenges using employee domain expertise in very targeted areas to solve LOB operational challenges. 

Mphasis’ Front-to-Back approach is consistent with the emerging industry practice of trying to improve digital technology performance with greater links to core systems to increase STP. However, Mphasis’ focus on subprocesses is differentiating. If Mphasis keeps to domains where it has critical experience, such as mortgage lending via Digital Risk or core banking via Hogan/Celeriti, it can deliver differentiated value to LOB executives looking to improve operational delivery and customer satisfaction.

Mphasis applies these capabilities to solve data management problems which cannot be solved by technology alone. For example, banks typically cannot utilize data effectively because:

  • Reference data is scattered across internal silos
  • Analytics applied to data is not timely, and therefore not relevant to real-time challenges
  • Implementing analytics requires costly IT platform changes.

Mphasis’ approach is to use live transactional data from one or a few data dialects (e.g. sales, payments, or service) and enhance it from external sources (e.g. internet searches, third party data vendors) and analyze it using cloud-delivered data services. This approach mitigates the challenges listed above and produces real-time, targeted analytics.

Assessment & outlook

All of Mphasis’ business is on a roll, and its BFSI business, which is 75% of revenues, grew its most recent quarterly revenues by 17.4% y/y. It has jumped on the digital services bandwagon but has correctly identified business results as necessary to successful offerings. To create immediate client value, Mphasis’ engagements focus on tightly defined industry challenges. Mphasis solves those challenges with projects which use disposable architectures to link customer engagement to the operating platform. Disposable architectures speed time to deployment and provide flexibility to implement changes in the future, as digital technologies and industry challenges develop. As the business evolves, Mphasis delivers follow-on engagements which extend or replace the current engagement with deliverables relevant to an evolved environment.

Mphasis has the industry domain expertise to deliver future projects which expand operational scope within its existing target domains (e.g. mortgage processing, financial services risk and compliance). However, it requires an expanding range of technology partners to access relevant emerging technologies. Its Sparkle Labs program brings emerging technology vendors into Mphasis’ ecosystem to create offerings for clients.   

To maintain above average market growth rates for an extended period, Mphasis will need to acquire some vendors with specialized expertise, like its acquisition of Digital Risk, which provided specialized mortgage origination capabilities. Specialized domains Mphasis might look to fill via acquisition include: 

  • Professional services capabilities for cloud implementation focused on a specific vendor (e.g. Google, AWS, or IBM). Each cloud vendor has a distinctive platform and environment requirements which require specialized knowledge
  • Domain expertise in sub-industry verticals. Mphasis should consider growing its capital markets capabilities where it is currently under-represented (e.g. investment banking or custody) 
  • Market presence and expertise in continental European markets of interest, including France, Benelux, Switzerland/Germany.
<![CDATA[Avaloq’s Emerging Technology Strategy to Enable Faster Banking Transformation]]>


I recently attended the Avaloq Community Conference in Zurich, where the key themes were cloud delivery, operations ecosystem, open banking platforms, and combined ITS/BPS engagements. Here I take a quick look at Avaloq’s strategy in each of these areas.

Cloud delivery

Avaloq recently announced a partnership with IBM for a global private cloud delivery capability for customer environments. IBM will be providing delivery of infrastructure as a service (IaaS) in all relevant countries based on a global standard blueprint, adapted by geography to regulatory requirements and security threats.

As Avaloq expands into new geographies with existing clients, its cloud delivery services will grow faster than its other services, eventually shifting most of its services into a cloud delivery environment. Cloud delivery provides the client with the benefit of allowing cost to match revenues in line with volume swings. In the long run, Avaloq will shift its internal delivery capabilities entirely to the cloud, leaving it with a completely virtual delivery center operations environment.

Operations ecosystem

Avaloq’s operations ecosystem includes ~90 external software vendors, up from ~60 last year. Avaloq is now investing directly in emerging technology vendors, such as the recently announced investment in Metaco, a vendor of blockchain cryptographic solutions. Avaloq acquired a 10% ownership, with other recent investors including Swiss Post, SwissCom, and SICPA.

Given Avaloq’s record of investing in emerging technology vendors with partners, we expect that they may formalize this soon as a venture capital consortium. 

Open banking platforms

Avaloq is addressing the open banking platform regulations with a big initiative to build APIs. Avaloq has delivered the first open REST API, which is a PSD2-compliant API based on the U.K. Open Banking specification. In the second half of 2018, Avaloq will be rolling out a set of 150 API end-points to cover functionality in 13 business areas. This will be followed by a second wave of API end-points in 2019. Using Avaloq’s APIs, clients can develop custom functionality more rapidly.

ITS/BPS services

Avaloq started as a software vendor, but expanded its offerings to deliver combined IT services and business process services (ITS/BPS) to meet their clients’ growing demand for comprehensive operations support to reduce (and enable variable) costs.

A key focus for the conference was RPA. Twenty percent of Avaloq’s clients use RPA in their operations. However, 50% of their clients are only in the evaluation phase. Avaloq uses RPA in three use cases:

  • Automating manual processes: typically deployed where employees currently perform highly repetitive processes, sourcing data from multiple systems. Here, RPA is expected to deliver automation of 90% of processes overall
  • Supporting repair processes (e.g. reconciliation): fixing failed automated processes (that are primarily manual). Applied to sub-processes, RPA raises overall process efficiency and, with machine learning included, eliminates many repetitive repairs for individual accounts until CIF files are updated to enable STP
  • Testing new services: operations are continuously improving, and RPA is used to facilitate efficient execution without the investment needed to fully automate a process which will be adjusted prior to final adoption.  

Avaloq has applied RPA to 10 processes, with an anticipated 20 more processes added by year end. Avaloq’s RPA solutions are used in its BPaaS services and to manage combined third-party/Avaloq environments.

The broader picture

The European and APAC markets are adopting platform transformation initiatives faster than the American markets due to compliance requirements in Europe and competitive challenges in APAC. Avaloq is seizing the opportunity with an aggressive partnering and open platform strategy. It is executing quickly, as its growth in APIs, RPA, and partners in the past twelve months demonstrates.

Avaloq will also need to be able to manage failed partnerships to succeed. Its senior management has the entrepreneurial attitude to recover from failed experiments, but it remains to be seen if its conservative clients and its own organization will easily adapt to a trial and error strategy. The fact is, the global financial services industry is being forced to move in this direction, so the successful organizations will be the ones who adopt a willingness to experiment early and enthusiastically.


<![CDATA[Capgemini’s Digital Banking Strategy Focused on Tier One Legacy Transformation]]>


I recently attended the Capgemini Financial Services Industry Conference in London, also meeting up with several banks to learn more about where they are spending their digital services money, what they are looking for from digital projects, and where the market is headed.

Bank demand for digital services has grown and matured over the past few years. In 2015 and 2016, IT services vendors expected strong growth in digital services engagements from European banks, only to have their hopes dashed. Since early 2017, demand from European banks has been strong. In fact, so far in 2018 European banks have demonstrated white-hot demand. Global banks have allocated budgets of $1bn to $2bn for digital transformation over the next two years, and are committing to spending an additional 4x or 5x that money over the ensuing five to eight years.

Rapidly scaling to meet digital demand

To meet BFSI digital goals, Capgemini believes it needs to deliver at scale globally with relevant market and domain skills. Capgemini’s BFSI group works with 70% of the top 100 global banks and BFSI accounts for ~27% of its revenues. It has~200K employees globally and 55k of those are focused on financial services, half of them based in delivery centers and around the world close to its clients’ operations. Capgemini has been rapidly growing staff to meet the demand for digital services, with ~70% of hires as lateral transfers, and it leverages an ecosystem of enterprise partners, fintechs, academia, and industry thought leaders to support this growth ambition. Of course, effective orchestration is the key enabler of a successful partner ecosystem.

Capgemini has built a reputation among its clients as a vendor who can fix troubled automation projects. Most of its engagements for enablement services, such as RPA, come to Capgemini from failed projects, estimated at one-third of all RPA engagements. RPA projects face challenges because although the POCs work well, the production environment does not match a POC’s conditions.  In a production environment, robots break as systems change and data flows shift. Capgemini has been able to rectify RPA projects because of its knowledge of the legacy environments the robots are operating in.  Capgemini sees RPA as a ‘band-aid’ to maintain systems until they can be transformed to digital platforms. It will maintain its RPA practice, but expand its digital platform replacement services capabilities.

BFSI platform transformation

Capgemini has focused its BFSI digital services business on platform transformation, which we estimate represents 85% of digital revenues. Client examples presented included:

  • Cloud migration: a global bank with multiple markets requiring continental standardization and consolidation of data and analytics
  • CX enhancement: a global retail bank needing to utilize best CX practices from other industries to improve financial services CSAT
  • Data analytics: managing data and analytics across >150 applications and silos to develop improved insights for a client
  • Designing a new client business model: an emerging Asian bank created a digital banking model to grow its business aggressively across the vast Asian markets.

Each of these engagements required a large-scale global rollout with local customization.

The broader picture

Tier one banks are changing their business models to address new industry cost structures and competitive challenges. And the change requires legacy platform renovation to deliver customer interaction capabilities at much lower cost. Hence, banks are:

  • Shifting to omnichannel delivery: the number of physical branches will be reduced, and remaining branches will deliver complex services using AI-augmented humans. The scale of the distribution channel transformation will be massive
  • Moving from ‘acting as a principal’ to ‘acting as a broker’: this will require coordinating large numbers of third-party specialist vendors to deliver a broad range of financial services to customers. Delivering this business model change requires legacy platforms to become open banking platforms. Opening legacy platforms, in turn, requires experience in both legacy and digital technologies and the scale to work on transformation across multiple geographies
  • Improving CX with improved fulfillment: this requires creating STP using technologies which can draw data across legacy silos
  • Increasing commitment to cyber security solutions to mitigate the increased risk exposures from moving workloads to omnichannel and cloud environments.     

Capgemini is maturing its digital BFSI business based on its engagements with several key clients, which are mostly tier one global banks. Previously, Capgemini had focused its engagements on European market requirements. Today, it has expanded its multi-decade, application-driven engagements to support global platform renovation at scale.

Opportunities for strong business growth come to ITS vendors only during periods of rapid technological change, and the digital banking revolution is such a period of change. Capgemini has recognized the opportunity, is committing the capital to building its delivery machine, and has the customer legacy platform experience to capitalize on the opportunity. It is pulling in a wide array of digital capabilities to serve a very focused set of clients, and its client case studies underline how each engagement is part of a very long-term development roadmap.  

<![CDATA[Infosys Builds Foundations of a Successful Open Banking Ecosystem]]>


The banking industry is undergoing significant legal and operational transformation, including the move towards open banking, a regulatory requirement whereby banks open their platforms to third-parties for them to transact business with the banks’ customers and suppliers. Here I look at how Infosys, with its Finacle suite of solutions, is working with banks to support the transition to open banking.

Open banking adoption is being driven by regulatory requirements including:

  • Unified Payment Interface in India (regulatory rollout began 2016)
  • Open Banking initiative in the U.K. (begins 2018)
  • PSD 2 in the European Union (begins 2018).

The regulations require availability, but not adoption, and today’s market for open banking initiatives remains experimental: some banks are running many initiatives, and others are adopting a wait-and-see stance. Across its markets, Infosys Finacle sees early open banking experimentation and adoption in India, and secondarily in the U.K. Infosys delivers: 

  • Finacle Digital Banking Solution suite, a proprietary banking platform with ~500 bank installations operating in 100+ countries. Finacle was developed more recently compared with many legacy banking platforms, from 2000 onwards. Its functionality was developed using a modular architecture which relies on APIs
  • Technology services in multiple geographies, each with differing business requirements and varying levels of API/open banking maturity.

Banks committing the largest amount of resources to open banking experimentation are institutions that are pursuing a digital approach to growth, either as a startup bank or as an established bank trying to reestablish itself as a digital bank. Limited financial resources to drive bank growth is common to all early adopters.

Infosys has identified six key use cases (below, in order of adoption), where banks have focused their open banking and API experimentation:  

  • Embed banking in customer-chosen apps
  • Participate in an ecosystem
  • Curate an ecosystem
  • Buy an ecosystem player
  • Offer banking as a service to Neo banks
  • Offer services to other legacy banks.

Five banks studied by Infosys have published APIs in their marketplaces. Each has published ~40 APIs across eight categories. The most heavily published categories are accounts, authorizations, and transactions. Complex categories have fewer published APIs, including loans, insurance, trading, utilities, and investments. Here are examples of the first three use cases listed above:

Use of customer-chosen apps: RBL Bank (India)

RBL is one of India’s fastest-growing private sector banks with an expanding presence across the country. In 2010, new management from global banks joined the bank to drive aggressive growth, and focused on new technology to enable growth. RBL has developed a large API developer community which has provided multiple API offerings to RBL’s customer base, including:

  • API-based trade finance services for corporates
  • Check truncation system integration to e-signature verification  
  • Account wrapper product.

RBL has grown its balance sheet by 25x over the past seven years, with its digital strategy including its use of these API offerings and other technology-based offerings.

Participate in an ecosystem: BBVA Bank (Spain and U.S.)

In May 2017, BBVA made eight APIs available to companies and developers. Under the program, BBVA makes its customer data available to participants to build products and services for customers. There is a two-stage process for third-parties to bring offerings to market:

  • Sandbox environment: the bank offers its tools and products for developers to create new offerings. Offerings can be developed, tested, and run in pilots with support for the bank
  • Production: the bank reviews proposed offerings and, if approved, developers can run offerings in production mode on the bank’s infrastructure. People or corporations can develop offerings, but only corporations can run production offerings.

Curate an ecosystem: Finacle Trade Connect

Multiple banks have created ecosystems of APIs for customer groups to use, including:

  • Deutsche Bank: UnternehmerPortal for SMB customers to access business information including benchmarking, business intelligence, credit monitoring, and trade information
  • HSBC: Connections Hub for business customers to connect buyers and sellers on a social media platform
  • Seven bank consortium: India Trade Connect, which is a domestic trade finance blockchain network. 

Let’s look at the seven-bank consortium in greater detail. The participating banks include ICICI, IndusInd, Kotak, Yes, RBL, DCB, and Axis. The consortium chose trade finance because it is a highly inefficient, manual process which, if digitized with blockchain, could have high efficiency gains. The group focused on Indian internal trade to simplify the operating conditions and comply with the Indian government’s Digital India initiative. The program moved from initial technology demonstration to production (March 2018) in one year. The solution, Finacle Trade Connect, works via APIs with any blockchain technology. Key goals were to:

  • Reduce costs (achieved 75% TAT reduction)
  • Digitize documents to reduce paper and manual processing
  • Mitigate operational risk with real-time tracking and uniform record of account
  • Increase opportunity for the creation of new revenue streams (currently under development).   

In mid-2018, the consortium intends to add new member banks to expand the volume of business that each bank can do in the marketplace. 


Several clear patterns emerge from Infosys’ experience. Open banking initiatives are:

  • Exposing platform APIs to third-parties and clients, impacting roadmap development similarly to an ISV’s client advisory panel. Unlike a client advisory panel, an API ecosystem not only recommends, but it also invests in the development of functionality which can then be publicly or privately consumed by a client base
  • Redefining the platform from a software-based infrastructure to a community-based network of ‘like-minded individuals’. Managing access and membership in the community will become the strategic business activity of the platform vendor
  • Starting with simple functionalities (e.g. transactions, identity management) and simple demands (e.g. client-based demand for functionality). Over the next two years, open banking will begin to address complex functionalities (e.g. business processes such as lending, insurance, and wealth management) and complex demands (e.g. multi-party businesses such as blockchain-based remittances, trade finance, and supply chain management)
  • Exposing new business ideas to large communities for validation – and investment made available to pursue new business ideas is much larger than what a single institution can harness.

A platform vendor such as Infosys benefits from third-party investments in its solution because it can ‘buy versus make’ at the individual function level, rather than at the level of an entire company. This will allow it to focus its investments in a way that is consistent with its business model.


This is the first in an occasional series of blog articles over the next year on open banking initiatives in the financial services industry. To find out more about NelsonHall’s Banking Operations & Transformation research, contact Simon Rodd.

<![CDATA[How Citibank & Unicredit Are Delivering Digital Loan Origination]]>


Loan originations are a key part of the digital revolution taking place in the banking industry, and banks have two key goals when they replace their legacy loan origination systems (LOS):

  • Enabling omnichannel delivery of LOS services
  • Reducing time to fulfillment (turnaround time).

Long-established banks are adopting digital solutions to achieve these goals with the expectation that omnichannel will increase the size of the sales funnel, and reduced TAT will increase the rate of applications converted to loans. Here I look at the digital loan initiatives being undertaken by Citibank and Unicredit with their respective solutions and service partners.

Citibank & Digital Risk, Mphasis

Citibank recently selected Digital Risk’s LoanFX to deliver origination services. The key functionalities sought by Citibank, and how they will be used to improve origination, include:

  • Single hub for loan origination: allows Citibank to manage and process its origination pipeline as a single portfolio
  • Use of external data sources: (D1C approved) pre-populates required data in the application, including partial data fields, e.g.:
    • Identifying the borrower
    • Determining income and assets
    • Pre-underwriting the loan.
  • Big Data Analytics: uses big data analytics to predict customer sales efficiency and improve the customer experience
  • Single sign-on: enhances cybersecurity and reduce fraud
  • Follow up analysis of engagements:  analyzes data generated from each customer application process to improve future engagements.

The solution accelerates origination by transforming the entire process, hence the ‘back end’ can keep up with the ‘front end’. Technology services are provided to clients by Mphasis, Digital Risk’s parent.

Unicredit & Circeo, Atos

Unicredit Central and Eastern Europe selected Circeo’s Loan Factory origination solution along with Atos’ services support for loan originations across multiple countries. Key capabilities of the solution include:

  • Software: can be customized to individual bank requirements with zero IT coding to enable continuous, rapid innovation in customer experience, products, processes, partnerships and business data
  • Rapid deployment: 4-6 months
  • Delivery: cloud and business process services
  • Pricing: pay-per-use model.

The Atos/Circeo partnership was formed in mid-2016, with each partner providing the following:

  • Circeo: software, technical consulting, integration, and maintenance
  • Atos: consulting, configuration, infrastructure, cloud hosting, additional functionality (primarily from the Worldline suite of solutions), BPS, infrastructure maintenance, IT operations, and helpdesk.

The solution allows Unicredit to continually change its business model, enter/exit markets, and adapt its loan offerings, at scale and without long lead times or continuing costs.

The wider picture

Digital banking is changing how banks conduct their business. Key capabilities delivered by digital platforms include:

  • Access to larger data sets, from third parties via the internet, to make improved decisions at lower cost
  • Faster deployment of new products, business models, and markets via cloud delivery of configurable solutions
  • Faster processing of originations due to increased STP and digital submission of partially or completely prepopulated forms
  • Conversion of operations costs from mostly fixed to all variable cost
  • Increased customer interaction with lenders and ecosystem partners (e.g. appraisers) in real-time or near real-time, with improved visibility of customer sentiment.

In previous technology cycles, improvements were incremental, producing 5% to 25% cost savings over legacy systems. Digital banking services are producing much higher cost savings in the 40% to 60% range. Also, cloud delivery and pay-per-transaction are eliminating start-up and sunset costs (which are rolled into the per-transaction fee and amortized over multiple client banks).

Increasingly, product and services vendors are partnering to deliver their offerings at scale. The challenge of digital banking technologies is a lack of qualified staff to work with the technologies across multiple markets. Global services firms are positioned to deliver at scale in multiple markets, and are also best positioned to add and train personnel in key technologies.

Banks looking to implement digital loan origination platforms need to look for services vendors with scale delivery capabilities, with a roadmap and commitment to aggressively grow personnel in relevant technologies, and deploy them into fast-growing markets. Finally, banks need to look at the service vendor’s cloud delivery strategy. Cloud delivery is available from a small group of high-quality global firms (e.g. AWS, IBM, Google, and Microsoft), but the adaptability of the platform to cloud delivery, product partnerships, and cybersecurity remain the domain of the solution and service vendors. Credibility and commitment to the cloud as a preferred option will impact the effectiveness of digital solutions.

<![CDATA[The Key Business Outcomes From Digital Banking Services]]>


I am currently working on a global market assessment of digital banking services, and my interviews with banks and service providers alike are showing that technology implementation is less of a concern than how digital services will change the way customers and banks interact. As customer/bank interactions change, the industry’s competitive forces will change, and this will eventually change the industry participants.  

Hence, digital banking services implementations have been focused on the customer experience and business outcomes rather than technology enablement per se. Key business outcomes sought include:   

  • Improved brand integrity via consistent customer experience – consistent experience across omni-channel and the entire value chain is required, with data and workflows pulled from across all customer channels
  • Enhanced brand via greater clarity of bank offerings – customer and bank need to agree expectations over what each is willing to offer and accept in the relationship. AI support is required to identify requirements and capabilities. Banks need governance flexibility to allow greater transparency (e.g. an open book approach to offerings)
  • Improved customer management and sales across product silos – the bank must identify the customer and their key attributes across products to enable more effective cross-sell and lifecycle management. Customer data needs to be scrubbed from existing bank silos and external sources and analyzed in real-time to offer optimum product sets to customers
  • Alignment of business drivers and operations – requires coordination within the bank across LOBs, operations, IT, and external technology vendors to deliver required business and technology capabilities, including governance and group communications to identify business goals/challenges and identify the appropriate technology to address those issues
  • Reduced time to market and cost of new product introductions – requires access to greater product sets without the cost of internal development. The technology required is ‘open platform’, so that third parties can plug into the platform. The challenge is for banks to manage a growing, and continuously changing ecosystem of vendors as ‘brokers of services’.

These changes, if done well, will increase customer satisfaction, retention, wallet share, word-of-mouth referrals, and customization.

In summary, digital banking is changing the way banks are engaging with their customers. Unlike prior technology waves, this one does not include the rip-and-replace cycle of technology implementation to create new functionality. Digital banking is intermediating between people (i.e. customers, employees, and vendors) and operations (i.e. existing operations platforms which are not being replaced). And digital technologies’ new intermediation capabilities make it possible to deliver customized offerings, which can create higher value for each customer.

However, if governance does not advance in step with the technology, customer value will decline. It is imperative that banks have the culture and operational maturity to pursue these goals effectively, or it will become a value destroyer for them.

I will be publishing a global market assessment of digital banking services in the next few months which will explore these issues in greater detail and provide examples of successful implementation business cases.

<![CDATA[Open Banking’s Early Initiatives & Likely Winners]]>


Open banking is the concept that banks will open their platforms to third-parties for them to transact business with the banks’ customers and suppliers, and is required by regulations which are coming into force. Many advocates believe that this will spur innovation in financial services and create new business models. Here I look at the open banking landscape and at initial efforts being made to capitalize on the initiative.


For centuries, banks have operated on a closed platform business model to create differentiation and barriers to competitive threats. The past few decades have seen banks investing in capital-intense technology platforms which significantly reduce the cost of delivery for tier one banks, providing them with a large cost advantage over lower tier banks. However, in recent years, regulators have sought to open platforms to increase competition in the industry, thereby benefiting consumers. The expectation is that new financial services vendors emerge and provide differentiated services to consumers and businesses at lower cost, made possible from using a tier one bank’s platform. 

Tier one banks are willing to give up the cost advantage of their proprietary platforms because of regulatory requirements. Key legislation necessitating open platforms include:

  • PSD2: The payment services directive 2 (PSD2, a European Union regulation adopted in November 2015 and effective January 13, 2018) mandates banks to operate open platforms to promote innovation in payments
  • Competition and Markets Authority (CMA) ruling in the U.K. requiring the largest nine banks to allow licensed FinTechs direct access to the banks’ data down to the level of transactions in transaction accounts.

A closer look

The banking ecosystem has well-defined participants, which include:

  • Tier one banks: own the platforms
  • Bank suppliers: includes exchanges, BPS vendors, financial product vendors (e.g. card schemes, loan investors, and securities issuers)
  • Customers: consumers and enterprises
  • Competitors: other banks and financial services product vendors.

Under a closed platform scenario, tier one banks take a proprietary role in financial products they sell. In effect, they buy the product and sell it to the customer. If the product is unprofitable, the bank loses money. Under an open platform scenario, the tier one bank takes an agency role (brokerage) and if the product is unprofitable the third-party vendor loses money, while the bank still makes its commission. Bad products can lead to brand impairment for the bank, but no direct losses.

In theory, opening platforms should lead to:

  • Greater product innovation benefiting customers with greater choice
  • Lower prices for products, because customers can choose the same products from multiple vendors without having to incur the switching costs of moving to a new platform.

How will this theory play out in practice? What type of products are being developed to sell via open platforms? And is this likely to increase choice and/or reduce costs? 

Case studies

Early initiatives to capitalize on the open platform phenomenon include:

  • Integration of multiple customer channels into one set of dashboards to facilitate bank management predicting customer behavior and managing CX
  • Implementing roadmaps to integrate third-party mobile services vendors into the bank’s offerings
  • Creation of an app store-style marketplace to offer analytics services (e.g. budgeting, robo-advisory, or mortgage broker) to consumers
  • Third party offerings looking to integrate into open banking platforms:
    • 3D visualizations of transactions (Money Journey)
    • Mobile app to help visually impaired (Speaking Bank)
    • Personal finance (Moneygarden and Spendchart)
    • Accounting packages (Kashflow).

As the examples above show, third-party offerings to date have been focused on either digital relationship management (portals drawing from multiple sources) or financial product offerings (channel access or advice). Since it is very early in the market evolution it is not surprising that there are no highly evolved offerings yet. And there certainly are no category killers or ultra-low-cost product vendors as yet.   


Open platform banking has spurred a great deal of enthusiasm for its ability to create new successful financial services vendors and increase bank customer choice. Emerging vendors offer interesting products, but ones without a sustainable moat. To develop sustainable differentiation, FinTechs will need to make heavy capital investments into their product sets. Only two types of vendors will be able to make these costly investments:

  • Large specialized vendors: in-country vendors who have a high market share in a specific product set (e.g. the largest mortgage lender in a country)
  • Foreign vendors: vendors operating in a foreign marketplace with industry characteristics that allow it to develop offerings which are well-suited, but unavailable in the domestic market (e.g. Asian banks able to deliver ultra-low-cost mass market products, or Swiss banks able to deliver sophisticated wealth management products).

The next five years will see a burst of high capital investment into the creation of heavily featured financial products for the open banking marketplace. Vendors who succeed will be the ones who can create a compelling, but narrowly defined roadmap for development. Successful execution of the roadmap will require effective curation of early user feedback to create product features which are intimately tied to user requirements. We expect over 80% of vendors will fall out of this race. But in five years, a few vendors will have grown to be titans of the financial industry for their product set, with superior operating metrics (i.e. very high margins and ROEs). 

<![CDATA[Atos Makes €4.3bn Unsolicited Offer for Gemalto; Another Bold but Challenging Move]]>

Atos has made an unsolicited offer for security, SIM cards, and payment cards technology vendor Gemalto. The offer is sizeable at €4.3bn (plus Gemalto’s net debt of €938m at end of H1 2017) financed in cash. It runs until December 15.

Gemalto is another major acquisition for Atos: in its fiscal year ended June 30, 2017, Gemalto generated revenues of ~€3bn, with an EBITDA margin of 17.1%. If the acquisition goes through, Atos and Gemalto will have combined revenues of €15bn, and an operating margin of around 10%; Atos would thus achieve the double-digit margin it has been targeting for years. NelsonHall has published further details of the proposed transaction in its Daily Tracking Service.

Perfect timing by Atos

Gemalto has issued several profit warnings this year related to its Payment and SIM card businesses, which last year represented 51% of its total revenues.

SIM cards are on a secular decline with the stagnation of mobile devices, and delayed investment by telecom service providers in newer SIM technology. The decline in SIM cards revenues accelerated in H1 2017 with a ~16% decline, where Gemalto was only expecting a 5% decline. Atos has stated it will launch a strategic review of the business, if it completes the acquisition.

Growth in its Payment business (smart cards used for payment cards, and related software and services, and mobile payments) in the past had been driven by the late migration of U.S. banks to the EMV standard. After a flat year in 2016 due to market saturation in the U.S., Payment revenues are down, by an estimated 16% in CC in 2017 YTD. Atos highlights that market conditions remain favorable in the mid-term with large geographies such as India still transitioning from a cash economy to electronic payments.

Gemalto has been investing in developing its cybersecurity portfolio, acquiring SafeNet in 2015 and 3M Cogent in 2017, and its M2M business (connected devices, tokens, and related software and security) saw double digit growth in Q2 and Q3 after a flat Q1. Some of its security solutions are experiencing difficulties (notably the Authentication business is transitioning from hardware to software), while others such Data Encryption are doing well. Other units are in different dynamics: Government security and identity is doing well while the Enterprise unit is challenged.

Following several profit warnings, Gemalto’s share value has been at its lower levels since 2011, in the €30-€32 range in the past month. Investors are moving away from Gemalto, not even encouraged by the reaffirmation of the full-year 2017 guidance. There is certainly an opportunistic element in Atos’ unsolicited offer: a 42% premium at €46 a share. This is not as generous as it may seem, as Gemalto’s share was trading at this level only a few months ago, in September.

Breton has also got the backing of state-owned investment bank bpiFrance, which owns a 8.3% stake in Gemalto.

And of course there will be TLCF benefits for Atos in France.

What does this mean for the Atos portfolio?

Currently, Atos has three main hardware and software businesses:

  • Its Big Data and Security (BDS) business includes a variety of assets, including specialized servers, supercomputers/HPC, security software, command and control systems. BDS is doing very well and is expected to grow by at least 12% per annum. 2017 revenues will approach €700m
  • Its Unify communication hardware and software business that it is currently restructuring and transitioning to cloud software. Unify overall is a €1bn business and is now trending towards revenue stabilization
  • Worldline in the payment software and services business, with revenues of ~€1.5bn, and aiming for organic revenue growth to reach 6%-8% by 2019.

Then comes the philosophical question: does it make sense for Atos to further expand into software and hardware? If it acquires Gemalto, Atos would add another €3bn in revenues from a variety of software and hardware assets that would represent overall ~40% of the group’s revenues. Is Atos is spreading itself too thinly across over an extensive portfolio of IT services, hardware (from quantum computing to specialized phones) and software? 

And what are the implications for Worldline? Gemalto has software payment security capabilities that Worldline would be able to use for its payment services - and Worldline has been very open about its ambitions to be the European payment services consolidator.

Outside of payments, how complementary is Gemalto's security portfolio to Atos? And will Atos be able to find a potential buyer for Gemalto’s SIM card business?

Atos' profile is increasingly moving away from building a consistent IT services and payment portfolio to becoming a hardware-plus-services & solutions firm. While this may appear to be contrary to what has been the prevailing trend, Atos has demonstrable expertise in identifying promising targets at a competitive price, subsequently integrating and restructuring problematic businesses at pace, then driving profitable growth from the acquired capabilities.  When Atos acquired Bull, for example, Bull was a €1.1bn firm spread thinly across servers, HPC, software, and IT services; the technology part of Bull now lies in BDS, which has become a high growth and highly profitable business. However, Unify, in particular the S&P business, which Atos had been treating as a discontinued operation, is still a work-in-progress.

Gemalto would bring a new and different set of challenges for Atos and its approach to addressing these is not yet clear. However, on balance, Gemalto brings in a set of capabilities that could prove very useful to different parts of the Atos Group.


NelsonHall has just published a comprehensive Key Vendor Assessment on Atos which looks at both Atos (excluding its hardware businesses) and Worldline. For details, please contact Guy Saunders

<![CDATA[Adventures in Blockchain: Mphasis Focuses on Client Revenue Growth, Supporting Compelling Use Cases]]>


In this article, I look at Mphasis’ Blockchain initiatives and at the segments they are focusing on for further development with their financial services clients. Mphasis began its Blockchain initiatives in 2016, initiating internal experiments and POCs to understand the technology and how it can be applied to business challenges.

Mphasis is working with a global financial services company on POCs and an approach to bringing a customer identity solution to the financial services market, in order to address consumer data challenges in a global environment. The customer and Mphasis are working to address multiple issues including:

  • Solution construct, design approach, and related technology considerations to select the right Blockchain technology from different options such as BigchainDB, HyperLedger, Ethereum, Multichain, network transaction currency and conversion to fiat, engagement layer and access point technologies
  • Industry ecosystem participation considerations – incentives, privacy protections, regulatory compliance considerations, trust and risk, and access point technologies to join the network
  • POC prototype and demo – for an initial MVP.

The POC took 7 weeks to demonstrate that the technology works and compliance is achievable. The solution was set up as a multi-node environment that enables the industry participants to transact, by enabling functions such as set-up and administration, search, crypto-payments, transaction administration, analytics, regulatory oversight and access.

Since then, Mphasis has built an ecosystem of Blockchain tools and best practices, and conducted multiple POCs. Clients are narrowing the range of use cases they wish to pursue further and are driving some of those into production.

Mphasis’ Blockchain services & use cases

Mphasis has a core group of 10+ engineers working on Blockchain initiatives who are based in Bangalore. Key attributes of Mphasis’ Blockchain ecosystem include:

  • POCs completed to date: 12, of which 50% were client requested and 50% internally undertaken
  • Clients engaging on Blockchain: 7 across banking, insurance, and airlines
  • COE founded: 2016
  • Platforms employed: Ethereum, Hyperledger, Multichain, and Bigchain.

Mphasis focuses on the Etherium and Hyperledger platforms in its Blockchain work, and expects to add a capability in Quorum soon. Key POCs to date include:

  • Trade finance for banks: enabling a decentralized network between importer, exporter, port authorities, and banks. Key issues addressed include document verification, fraudulent activity incidence, and document losses
  • Mortgage document management: the goal is to store documents on the DLT as a customer goes through the loan application process. This will allow vendors (e.g. insurance companies) to access the documents and speed up TAT, which will reduce cost of origination and improve customer experience
  • Record keeping: enabling a single version of the truth, with additional components including IOT and smart contracts
  • Patient health records: enabling confidential sharing of patient records and with intended participants
  • Baggage-as-a-service: distributed, decentralized system for tracking bags during travel by passenger using mobile device
  • Group insurance claims: stakeholders including hospitals, insureds, insurer, and third-parties transact and exchange documents to enable fast settlement of claims
  • Contract management: digital signing of documents on a Blockchain network to ensure transparency
  • KYC registry: enabling a KYC market utility using Blockchain.

Going forward, Mphasis will focus on:

  • Consulting for clients considering Blockchain initiatives
  • Delivering Blockchain implementations (POC or operational) with integrated application suites to reduce time to market and increase platform efficiency
  • Delivering operational support for Blockchain environments based on its solution experience.
  • Continuing to create use cases around KYC registry, mortgage document management, trade finance, baggage-as-a-service, and group insurance claims.


To date, most Blockchain services vendors have been focused on enabling small groups of direct stakeholders to use Blockchain to eliminate the need for third-party support. Mphasis has focused instead on enabling stakeholders to bring in third-parties as customers, and use Blockchain as a highly secure, reliable self-service tool. This should allow data holders, the sponsors of these initiatives, to monetize their investments in customer data and documents. This will allow Mphasis eventually to transition its Blockchain services towards operations support and cybersecurity. By supporting its clients’ efforts to drive revenue growth, Mphasis is able to support compelling use cases for employing this technology.

<![CDATA[How NS&I Transformed its Digital Banking Customer Experience]]>


NelsonHall recently hosted a webinar in which U.K.’s National Savings and Investments (NS&I) discussed how it has transformed its customer experience and operations delivery, and in so doing increased the value of assets managed by 245% and annual contact volumes by 660% while reducing delivery staff by 76% and cost of operations, calculated on a per assets under management basis, by 24 bps.

NS&I’s Mark Keene, who manages the operation’s outsourcing relationship with Atos, described four key initiatives which have enabled it to transform its delivery into a very low-cost digital business with rapidly growing revenues.

NS&I’s business model is a self-funding process of reinvention where operational savings generated from digitizing its operations allows NS&I to generate additional revenue streams from new channels, offerings, or customer demographics. The strategy was implemented using four key initiatives:

  • Business reinvention: modernize the platform and business model to shift distribution to digital channels 
  • Customer experience: improve CX by implementing channel interfaces, which were created using design thinking to improve delivery of CRM services
  • Operational Excellence: change supporting operations infrastructure from physical to digital to takeout ~70% of delivery costs
  • Trust and compliance: mitigate cybercrime and data loss risks inherent in the new digital infrastructure.

Each of these initiatives required close coordination with Atos. Key components of each initiative are covered below.

Business reinvention

Business reinvention consisted of two components:

  • Platform modernization
  • Ability to pursue B2B business with other government agencies.

Platform modernization delivered functionality including:

  • Transfer to a new operating platform of ~1Bn Premium Bond records
  • Consolidation and virtualization of the IT infrastructure
  • Retiring of legacy infrastructure and applications
  • Implementation of a training and competence framework
  • Implementation of a new evaluation tool to drive improved call center operator performance and gather real time feedback from NS&I customers
  • Automation of ‘Evidence of Identity’ checking regime for initial sales
  • Technology to support the shift to online and telephone channels for customers to manage their NS&I products.

The new banking platform made it faster to develop and bring new offerings to market, and remove offerings when sales targets are reached.

B2B business with other government agencies has been pursued with three agencies delivering payments services. In 2014, NS&I and Atos created NS&I GPS (Government Payment Services) to deliver payment services. The offering reduces NS&I’s overhead costs, and at the same time it reduces the cost of payments for the other agencies. Currently there are contracts with the Ministry of Justice, the Home Office, HMRC, and the Department for Education.

Customer experience

Prior to the customer experience initiative, NS&I was a paper-based institution. NS&I increased channel access and captured CX to improve overall customer satisfaction. To implement these changes, NS&I set up a CX directorate, which coordinates teams including: 

  • Customer Insight Team: to generate an understanding of customer requirements and current performance, and move from a product-centric view to a customer-centric view
  • Digital Engagement Team: to build a CX lab based in Glasgow for clients and NS&I to shape, prototype and test business concepts
  • Customer Communications Team: to change contact management culture at NS&I to improve CX and ensure deployment of a mobile optimized website and apps, web chat and co-browsing that will support customers.

NS&I now sells 100% of its offerings direct to customer via digital channels. It offers customers an online experience that has been designed and tested with its customer base, with 3.7m customers registered to use online services.  

Operational Excellence

Operational excellence consists of two components:

  • Workforce management: reduction of operational headcount from 4.2k to 1.2k in a heavily unionized environment, without the need for any compulsory redundancies
  • Real estate consolidation: replaced the entire operational estate portfolio with economically modern real estate, including highly efficient buildings with low carbon footprint and inbuilt sustainability. Reduced the legacy footprint of 1.2m sq. ft. by ~85%. Released £13m of real estate capital receipts. Reduced real estate running costs by 50%.

Funds released have been reinvested into the three other NS&I initiatives discussed here.

Trust and compliance

The move to virtual operations delivery and digital channel sales only means that NS&I is more vulnerable to cyberattack. Atos upgraded the core banking platform to mitigate existing and emerging vulnerabilities as security threats become more sophisticated. To align incentives between vendor and client, NS&I contracted with Atos for them to ensure compliance with all current and future FCA regulations. Atos carries the risk for all losses associated with fraud, error or data loss.


Growing a business is tough. Growing a business while reducing costs and increasing profits is even tougher. NS&I has succeeded in accomplishing this goal by realistically assessing its capabilities and strengths, then partnering to access capabilities and disciplines which it did not have internally. Disciplined partnering has led to a long-term journey which has built strong competitive differentiation of offerings, customer experience, and cost structure.

The build-up of differentiated capabilities and brand promise over a long period of time creates proprietary IP and customer goodwill which is very hard for a competitor to challenge over the long term and impossible to challenge in the short run. To date, NS&I has relied on government sponsored investment products to create its own differentiation. By changing its delivery to reduce cost and increase channel offerings, NS&I is creating a new set of differentiators. Established competitors will find it difficult to challenge the new cost structure, and Fintech start-ups will find it difficult to challenge the brand promise in any reasonable timeframe. While any such competitor tries to make such a challenge, NS&I will continue work on its operations roadmap development with Atos to build additional capabilities. Over the next three years, NS&I will be creating:

  • Offerings for mass market customers, which require even lower cost operational delivery
  • B2B digital engagement offerings for its government clients, which can eventually be productized for sale to private sector B2B clients.

Critical to NS&I’s ability to adapt to the changing marketplace is the ability to consider and experiment with new technologies. NS&I and Atos are currently exploring the possibilities of blockchain and encryption technologies, artificial intelligence, platforms, prescriptive analytics, and accessing wider innovation through open API connectivity. We will update you on the results of these initiatives as they are known. 


NelsonHall runs regular webinars for buy-side sourcing practitioners. To find out more, contact Vicki Jenkins.

<![CDATA[Adventures in Blockchain: Capgemini Focuses on Helping Clients Develop Their Roadmap]]>

In this blog, I look at Capgemini’s Blockchain initiatives and what segments they are focusing on for further development with their financial services clients.

Initially, Blockchain engagements were focused on: 

  • Using POCs to develop an understanding of the capabilities and limitations of distributed ledger technology (DLT)
  • Developing business use cases, trying POCs to determine if there is an effective business application of the technology
  • Conducting due diligence on vendors to understand the supplier ecosystem.  

Recently, financial institutions have been narrowing the range of use cases and vendors they are willing to consider. They are looking to drive forward one or more use cases to full production, and their focus with Blockchain services vendors is to develop a selective roadmap for operational deployment of a few high priority engagements.

Capgemini’s Blockchain services & use cases

Capgemini has been pursuing Blockchain for two and a half years, and it has a group of 25+ engineers working on Blockchain initiatives, with seven engagements currently in play. Capgemini’s Blockchain practice believes successful initiatives require a combination of business domain and technology expertise, and it focuses on five areas:

  • Technology expertise: especially DLT, cybersecurity, communications, and data management
  • Domain expertise:
    • Structured finance: trade finance and factoring, non-listed, non-codified bilateral agreements
    • Payments: real-time international payments transactions, including compensation, settlement, and reporting
    • Capital markets: Post Trade Automation (including optimized Collateral operations), Syndicated & Commercial Lending, and Non-Listed Securities
    • Insurance and reinsurance: focused on European companies for smart contract management 
    • Digital identity: security and personal identity for access to the DLT
  • Program management: DLT projects are complex and agile, with the client and vendor are working together on the project  
  • Alliance partners: cloud providers, and product vendors. Capgemini participates on industry panels, especially on Hyperledger Fabric, to create and support roadmap development
  • Partner on business: platform-based operations delivery. Creation and governance of the utility that will provide service to the clients.

Currently, Capgemini works with four key technology stacks:

  • Symbiont
  • Hyperledger
  • R3 Corda
  • Ripple.

Capgemini believes it is differentiating to understand the current state environment within a given client (both business processes and technology processes). Further, that understanding is required to be able to effectively reimagine processes using any advanced technology, especially Blockchain.  

Ultimately, Capgemini wants to act as a universal integrator, partnering with technology providers to support clients redesigning their business with Blockchain centric services that also leverage complementary capabilities like AI or machine learning. Capgemini is aiming to serve as the Transformation Partner for their clients, where Distributed Ledger Technology is the transaction framework to deploy next generation, collaborative operating models. Working with key partners, they will continue to evolve core technical competencies in Blockchain to its clients, such as:

  • Blockchain as-a-service
  • Security as-a-service
  • Identity management as-a-service.  


To date, most Blockchain services vendors have been:

  • Delivering POC engagements to clients as clients work to identify opportunities to use Blockchain technologies, or…
  • Building Blockchain POCs for utilities they might productize for clients.

Capgemini is pursuing a third path of building on its extensive work with client legacy systems, and coupling that domain knowledge of the client with its own ability to coordinate multiple technology vendors to create faster, more effective business restructuring around Blockchain capabilities.

Ultimately, as Blockchain technology matures, Capgemini will transition to providing Blockchain infrastructure services focused on security and technology platform outsourcing. While the technology is still at a very early stage, adoption is increasingly looking to be done primarily by tier-one institutions. The technology will mature rapidly, and infrastructure providers will be harvesting most of the revenues being created for vendors in Blockchain.  

<![CDATA[Digital Services Drive Capgemini’s Financial Services Industry Engagements]]>


NelsonHall recently attended Capgemini’s financial services analyst conference in Boston, where the company discussed its activities and roadmap for the industry, which is focused on digital services. Here I look at how digital services are now driving Capgemini’s financial services business, with client examples.

Capgemini’s shift to digital financial services

Capgemini formed its financial services unit in 2007 and has grown its financial services business 7-fold from 2007 to 2017, increasing its share of Capgemini’s overall revenue from ~7% to ~28%. In 2014, the financial services unit started its own business transformation to focus on digital services for clients. Today, digital services for global financial institutions represent ~50% of its financial industry business and is growing five times faster than its legacy business. Capgemini’s financial services unit has a client base that is geographically diversified, with ~90% of clients evenly split between the U.S. and Europe, and the rest predominantly in APAC.     

Per Capgemini, and consistent with our research, financial institutions are anticipating severe cost compression over the next five years. For example, some capital markets firms expect 20% cost compression. These firms need to aggressively take out cost and have announced cost takeout programs (e.g. BNY Mellon and State Street) which are now several years old and still ongoing. However, the cost compression will not come in a predictable, straight line fashion. The capital markets industry prices its services based on assets under management (AUM). When the market declines, revenues fall due to declining asset values and redemptions. Capgemini is adapting its pricing mechanisms for hosted and outsourced services to follow the AUM-based revenue streams of its clients. This exposes Capgemini to greater revenue volatility, but should create greater client stickiness by supporting client margins regardless of volumes.

Client examples

The most compelling aspect of the conference was the client presentations. Each of the clients represented has substantially changed its business model to expand its lines of business beyond traditional boundaries. Previously the cost of expanding into new lines of business, with new customer bases and new markets, was cost prohibitive. Now, using digital delivery to lower the cost of entry, financial institutions are creating many new lines of business. Below are two examples of the client activities presented at the conference:

  • Large North American bank: this client wants to drive revenues by using APIs to drive ‘headless banking’ and introduce new channels for product distribution. The bank used to launch only fully tested products. Now it is experimenting with launches of beta level products which are then developed in the market. Initial experiments indicate that new products will often require experimentation with pricing models, often derived from non-financial industries, to make the products successful in the market
  • Large Asian bank: A well-established bank HQ out of Singapore started its digital initiative few years back and has 30 APIs in use for digital transformation. The bank has implemented many digital bank projects, but some of the LOBs are still in the process of completing their digital transformation. By publishing its APIs, demonstrating successful digital-delivered product launches, and using third-party ITS labor to mitigate the lack of sufficient digital talent to meet demand in Asia, the bank is changing its culture and LOB leaders are pursuing digital product launches as the first choice for new products (due to lower risk and higher expectation of winning new customers). 

In addition, new regulations are driving traditional ITS business, as compliance implementation deadlines continue to drive system modernization. Capgemini has a large payment ITS practice where it is currently working on PSD 2 compliance for European clients. PSD 2 allows any bank customer to use third-party service providers instead of the bank, and requires banks to provide APIs so those third-party providers can access the bank’s platform.

In summary

Banking is changing from a closed-platform industry to an open-platform industry. Digital services are both driving and enabling this change. Capgemini’s client legacy banks are transforming their businesses to adapt to open their platforms to allow customers to customize functionality and products they want to consume. Competitors and partners are gaining access to the bank’s platform to deliver services to the bank’s customers. Creating, managing, and curating APIs is the first step in this evolution. The next step is developing cognitive capabilities to manage the process well.

Finally, the banking industry is being forced to adapt business practices and models from other industries, such as pricing models, to successfully launch new products into the market. Rapid experimentation, coupled with the ability to identify and retain best practices, will be key to banks successfully managing their transition into digital institutions.   

<![CDATA[Adventures in Blockchain: Virtusa Focuses on Security & Privacy Issues in Permission-Based Environments]]>

Most Blockchain use cases have focused on reducing the need for (and cost of) infrastructure. And in Virtusa’s case, the vendor has focused on engagements where it can combine Blockchain technology with other emerging technologies such as QR codes, IoT, and encryption algorithms to deliver enhanced security and cost savings for environments lacking adequate supporting infrastructure. Here I take a look at Virtusa’s Blockchain initiatives.

Virtusa’s Blockchain services & use cases

Virtusa has been pursuing Blockchain for 3 years, and it has a group of 20+ engineers working on Blockchain initiatives, with 35 additional engineers in training in Hyderabad, who will be fully deployed by Q4 2017. Virtusa provides consulting and pilot services including:

  • Strategy and design:
    • workshops for awareness and adoption
    • Use case creation and validation
    • Advisory on technology and vendors
    • Research on 400+ Blockchain startups  
  • Sandbox:
    • Cloud-hosted experimentation
    • ~7 Blockchain variants, including: R3 Corda, Etherium, Multichain,, Hyperledger, Quorum, and VP Blockchain
    • APIs to key platforms (primarily CRM and ERP)
    • Testing capabilities with very large datasets
  • Accelerators:
    • 100+ pre-compiled use cases across multiple industries
    • Solution accelerators (listed financial industry only): payments, credit monitoring, check fraud, trade finance, OTC derivatives, interest rate swaps, and covenant management
  • Advanced
    • Security (keyless cryptography, and homomorphic & format-preserving encryption)
    • Industry steering council participation in ISO TC-307 Blockchain and distributed ledger technology

To date, Virtusa has worked on ~100 use cases with clients, of which ~50 have been moved into pilots and remain active engagements. Of the active use cases, ~40 are in the financial services industry. Currently, Virtusa is working on three key use cases to develop them into operational deployments. The top three business patterns that establish strong use cases are:

  • Provenance: check books or other financial instruments can be validated as authentic from a chain of ownership. Example: use of QR code on checks for retail bank customers to reduce check fraud
  • Chain of custody: KYC, AML checks on transactions moving through an ecosystem. Example: rather than conduct comprehensive KYC/AML checks, as updates are required, banks can conduct KYC/AML checks from the last verified point in the Blockchain  
  • Permission-based sharing of information: third parties can now share information securely based on homomorphic encryption (low cost) and format preserving encryption (used extensively today in the cards processing business) and benefit from the blockchain enforcement of rules to remove the need for a trusted third party. Example: use of IoT to log usage of farm equipment leased to multiple parties. 

Virtusa is moving all three of these use cases into production with its clients over the next ten months. It believes that its most differentiated offering is the permission-based sharing of information, due to its access to very low-cost, strong encryption technology. All three of these engagements are based in APAC/Middle East markets. Deployment of operational Blockchain environments in the mature markets of the U.S. and Europe are less likely in the short run due to strong existing infrastructure and the need to establish industry standards. However, changes in the mature markets, such as Brexit in Europe, and the recent announcement of support in production e.g.  Hyperledger fabric version 1 are likely to drive adoption because those changes will either require costly new infrastructure or a group of partners sharing a Blockchain environment.   


The case for Blockchain operations is developing fastest where institutions operate with little infrastructure (physical or institutional) and services vendors can combine multiple technologies beyond Blockchain itself, to deliver the functionality of a mature marketplace without the industry-wide investment required to create a mature marketplace. This favors business cases where banks operate in an emerging market or where a new bank product is getting deployed which does not have competitors in the market today.

By developing a set of use cases for Blockchain in banking, Virtusa can support clients who differentiate themselves by unique product offerings. Virtusa can help those clients reduce their time to market, which will provide the longest time in market with a product which has no close competitive offerings. By adapting the mix of technology products it combines with Blockchain technologies, Virtusa will also benefit from time in market with few or no close competitive service offerings.   

<![CDATA[Adventures in Blockchain: TCS Focuses on the Building Blocks of a Successful Blockchain Ecosystem]]>

Many Blockchain services vendors have observed that up to 75% of proofs of concept for Blockchain fail to meet their goals. Analysis of drivers for such widespread failure indicates that the initial use case was flawed because it was constructed to justify experimentation rather than solve business challenges. However, TCS has focused its Blockchain efforts on developing uses cases that can drive successful adoption and, more importantly, define the ecosystem for successfully meeting a use case’s key performance criteria. In this latest blog on current Blockchain activities in the financial services industry, I look at TCS’ approach to Blockchain in banking.

TCS’ Blockchain initiatives

TCS has been pursuing Blockchain for 3 years, and it has a group of 100+ engineers working on Blockchain initiatives across all industries. In banking, TCS’ Blockchain group is based in Chennai. TCS’ primary goal is to develop effective Blockchain use cases for the banking industry, and to date has successfully developed 150+ uses cases across all industries.

The use cases for banks segment into key areas of interest for banks:

  • Trade settlement (securities, FX, payments, etc.)
  • Trade services (import/export). 

The largest demand for Blockchain services so far is for KYC/AML services. The key drivers for these areas of interest are processes where one of the following conditions apply:

  • Process requires frequent document re-verification: KYC requires re-verification periodically, and for each new product sale. Trade finance requires re-verification as the documents pass along a chain of activities, with multiple counterparties
  • Timelines and chain of activities must be attested: dispute resolution in trade settlement and trade services requires the ability to trace back to the point in time where a discrepancy in the interpretation of activity occurred.

The processes are primarily from closed loop transactions.

TCS offers consulting, ITS, and process audit services for Blockchain activities. In financial services, TCS has blockchain initiatives in retail banking, investment banking, capital markets, commercial lending. While TCS has not completed the implementation of blockchain project in operations delivery, it has done several POCs for customers in payments, securities settlement, trade finance, "know your customer" and supply chain finance. It is currently involved in a live Blockchain operations environment for a large global bank for Blockchain support of payments), providing audit support for the project. This allows TCS to enhance its understanding of what works and doesn’t work in a Blockchain environment, of which there are few, and none of scale, at present.   

TCS works with major Blockchain technology vendors including Ericsson-Guardtime, IBM, Microsoft, and associations (e.g., MIT Media Lab Digital Currency Initiative) as well as through its COIN partners. It has a proprietary Blockchain solution, which it deploys as required in its POCs, but does not sell as a standalone solution.


Global financial institutions are heavily experimenting with Blockchain to understand how and where to use it in their business – or even better, how to use it to change their business model. However, our research shows 70% to 80% of Blockchain POCs fail to meet their initial business case. The biggest challenge in Blockchain is understanding what makes a good business case, and getting stakeholders to cooperate on adoption. The technology, despite its arcane and novel characteristics, is not the primary impediment to adoption.

TCS is focusing its Blockchain efforts on developing a granular understanding of how Blockchain works, and when it succeeds in a business environment. This approach will create efficiency in Blockchain adoption for financial institutions because they will waste less effort on “a solution in search of a problem” and spend more resources applying the right solution to business challenges. TCS is not there yet, but headed in the right direction.    

<![CDATA[Avaloq Combines Tech & Ops Delivery to Help Wealth Managers Slip the Surly Bonds of Legacy Environments]]>


I recently attended the Avaloq client conference in Zurich. The conference was well attended, with ~400 attendees. Avaloq is on a roll, adding clients across offerings and markets for the past several years. Here I outline how they are doing it and what their next steps are.


Avaloq is a privately held vendor of technology-based solutions and services to the financial services industry. It was founded to provide a comprehensive core banking platform, the Avaloq Banking Suite, to banks and wealth managers. Avaloq uses its own banking platform with all its clients, and its banking suite has strong wealth management functionality, which has been extended over the past few years to deliver mass market wealth management and retail banking functionality.

BPS delivery capability was added in 2011, when Avaloq expanded its services into BPS by acquiring a 51% stake in B-Source, a BPS provider founded in 1995. In 2016, Avaloq acquired 100% ownership in B-Source. In addition to its own modules and APIs, Avaloq also has partnerships with ~60 external software vendors to extend the scope of its platform’s capabilities.

Unlike most software vendors, Avaloq has made a strategic decision to move into operations delivery. Avaloq perceives the market is moving towards combined technology/operations delivery because of mounting cost pressures, which limit or eliminate the ability to provide internal IT staff or software delivery or maintenance. Unlike in previous decades, when client banks’ platforms reach the point of requiring a major overhaul, most cannot apply the resources to modernize the platform. Even for banks with those resources available, the business case does not justify an internally-led modernization.

Technology Strategy

Avaloq’s core platform is a proprietary wealth management banking platform which it is modernizing and adding retail banking functionality to. Key components of its development roadmap include:

  • Modularization of its platform: it is rearchitecting its platform into modules which can be integrated into any other banking platform. Ultimately, Avaloq expects to have a set of modules which can be integrated into any client environment as the client chooses
  • As-a-Service delivery: Both BPaaS and SaaS are the types of delivery targeted. Partnerships with a large group of vendors are a core part of the As-A-Service delivery model for Avaloq  
  • E-Bank: digital delivery for traditional banks and startup banks requires a core banking solution which is designed to be flexible so that new functionality can be enabled with minimal implementation effort  
  • Mobility: enabling mobile access to banks’ proprietary platforms and integration to Avaloq partners’ mobile solutions and services. Avaloq’s goal in enabling mobile access is to support banks’ attracting new customers 
  • Advisory: via partner offerings, accessing multiple options for automated advisory services
  • Usability and CSAT: using design thinking methodologies, Avaloq is developing improved user interfaces and portals which can be adapted to individual bank branding preferences while delivering greater intuitive ease of use for customers.

To deliver platform modernization for its client base, Avaloq has a staff of 450 developers in 3 development centers in Europe and Asia.

Avaloq has already deployed modules for clients via As-a-Service delivery for:

  • Automated advisory  
  • Customer self-service
  • Wealth management.

The goal-based wealth management module will go live at year end 2017. Also in 2017, Avaloq will launch new software functionalities including:

  • Ability to do online software upgrades, with either hot or cold rollovers
  • Greater security features, primarily user identification features
  • New compilers to provide faster innovation (not a client-facing feature, but one that impacts clients)
  • Division of module components into smaller modules.

In addition, Avaloq is experimenting with technologies including:

  • Blockchain (more on this in a subsequent blog post)
  • Web and mobile usage tracking
  • Enhanced AI using the client’s own data
  • Machine learning
  • Chat bots.

Go-to-Market Strategy

Avaloq has focused its go-to-market strategy on selling a combined technology and operations offering. This has been informed by Avaloq’s experience with running operations for banks in its BPO centers. These banks provide Avaloq with best practices and business cases across a wide variety of customer segments and requirements. The ARIZON JV builds on this model and will be running the back-office operations of the 270 banks of the Raiffeisen Group in Switzerland, (Raiffeisen is the 3rd largest banking group in the Swiss market).  

Critical to meeting the client project requirements is understanding and refining the business case for transition. Avaloq focuses on understanding and developing the business case for a client’s proposed project. Third party vendors can source an array of services to meet platform modernization projects, a task that banks often find distracting from their ongoing business. The combination of understanding the clients’ requirements and delivery of modular functionality with operations execution has allowed Avaloq to sell to the wealth management divisions of tier one banks.    

Avaloq’s current markets include 25 countries in continental Europe and Asia. The target markets for future entry include the U.S. and APAC.

Avaloq will not enter a new market unless it has a scale entry opportunity. In practice this means it will only enter a new market when an existing global client decides it wants to enter a new market using Avaloq software. Thus, based on conversations with clients about their intentions, Avaloq anticipates entering the North American marketplace in the next 24 months and several more APAC marketplaces in the next 12 months. 


Avaloq is focused on developing and delivering a combined technology and operations offering. The most frequent buyers of their offerings are wealth managers facing a major systems upgrade. They have developed their domain expertize with their own executives who have worked for industry participants, including clients; and they have developed solutions which are used by local Swiss wealth management banks as well as tier one banks and international banks and wealth managers.

They have broadened this capacity with a development roadmap for their offerings that includes:

  • Technology: based on work with clients and customers that provide design thinking insights, and then they have modularized their entire platform to allow clients to consume whatever functionality is needed when needed
  • Ecosystem of vendors: currently ~60 vendors which include best in market for certain key functionalities and many emerging functionalities
  • Operations delivery: SaaS, BPaaS, and cloud (public and private).

Avaloq is targeting a fast-growing niche of the financial services market, wealth management, with a combined technology and operations set of offerings. Its large partner ecosystem allows it to provide a wide range of enhancements which clients can implement in unique configurations to create highly differentiated wealth management businesses. This capability has attracted tier one banks to buy a wide range of services form Avaloq, unlike the typical tier one buying strategy of buying unitary services to implement into the bank’s overall operations program. Because of this, Avaloq is well positioned to build a business that services all tiers of wealth managers in multiple geographies. That would be a unique business in BPS for the financial industry. 

<![CDATA[HCL Acquires UFS’ Mortgage BPS Business to Build As-A-Service Consumer Loan Business in U.S.]]>


As discussed in my blog of April 12, 2017, the mortgage processing industry in the U.S. is challenged to remain profitable because, from 2012 to 2016, loans outstanding grew 1.8% per year, while processing costs grew at 7.3% per year. This is leading to industry consolidation and operational restructuring. A recent example of a BPS vendor consolidating in order to drive greater efficiency into operational delivery is HCL Technologies with its acquisition of Urban Fulfillment Services Llc. (UFS).

Analyzing the transaction

HCL has agreed to acquire UFS for $30m, to be paid in tranches as certain goals are met. The transaction is expected to be completed by June 2017 subject to transfer of licenses (in 48 states) and regulatory approval. Founded in 2002, UFS has:

  • ~350 employees
  • 3 delivery centers:
    • Troy, MI
    • Denver, CO
    • West Lake, CA (Los Angeles)
  • 4 clients across 3 key demographics:
    • 1 tier one bank
    • 2 credit unions, of which one is the 3rd largest federal credit union
    • 1 non-bank lender
  • Services that are predominantly origination portfolio purchases, and fulfillment. HCL did not purchase the appraisals, evaluations, mailroom, or print services
  • Bank products supported for conforming mortgages, non-conforming mortgages, HELOCs, and refinances
  • ~200 mortgages processed per day on average.

UFS provides a client base that overlaps with HCL’s clients, but from the capital markets side. HCL has a capital markets client base that is increasingly looking to buy loan portfolios, allowing HCL to upsell UFS services to them. Indeed, the price paid is reasonable to gain access to a substantial U.S.-based M&L BPS business.

UFS brings onshore delivery capabilities, with capacity for internal growth. Its staff have on average 10 years of M&L BPS experience.

The acquisition allows HCL to grow strategic parts of its business:

  • SaaS cloud delivery: HCL will enable As-A-Service delivery of software and BPS. This will reduce cost of delivery for clients, which is important in the current cost pressure environment. HCL will use FinTech enablement to deliver much of the efficiency improvement in operations, and intends to build a loan origination solution delivered from the cloud as a new offering for clients
  • Retail banking (not just capital markets): HCL wants to pursue consumer loan BPS across all its processes.

HCL is also looking to make additional acquisitions over the next year to gain specialized loan expertise such as auto or student loans.


HCL is a vendor with strong technology services capabilities, which will be needed for adapting the strong loan BPS assets acquired in this transaction. HCL will be challenged to integrate UFS (which sells BPS services to consumer lenders) into its capital markets and ITS portfolio of offerings. Maintaining cultural independence and cross-cultural coordination within the resultant organization will require clear role-based definition and execution. HCL has been a successful serial acquirer of businesses, which indicates it should be able to successfully integrate these two firms.

Profitability will be dependent on increasing the level of automation. While UFS is currently profitable, the market is experiencing a large cost squeeze, driven in part by compliance costs, but also by stagnating volumes. When the origination market makes a cyclical downturn, volumes will fall aggressively. HCL will need to have implemented its FinTech enhancements to drive down break-even capacity utilization ratios, to be a winner in that environment. HCL is on the right path to succeed, but speed to digital enablement will determine if it can execute successfully.


NelsonHall will publish a major market analysis report and NEAT vendor evaluation for next generation mortgage and loan BPS services in late Q2 2017, addressing M&L BPS market issues in greater detail. 

<![CDATA[Adventures in Blockchain: Wipro Focuses on Rapid Innovation with Ethereum & Hyperledger]]>

This is the second in a series of blogs on current activities, use cases, POCs, and pilots with Blockchain in the financial services industry. In this one, I look at some of what Wipro is doing to support banks and financial services companies in deploying Blockchain solutions.

Blockchain technology & services

Wipro has been active for the past three years in offering Blockchain consulting and development. During that time, it has worked primarily with Ethereum, and Hyperledger, to develop its Blockchain solutions. Wipro has decided to be agnostic about technology partners because of the rapid pace of development and innovations in Blockchain technology, but it does have partnerships for cloud-delivered services on Blockchain. Current partnerships for cloud-delivered Blockchain services include:

  • IBM Bluemix
  • Microsoft Azure DevTest Labs
  • AWS.

In Blockchain, Wipro provides the following sets of services:

  • Advisory: engagement with thought leaders and CXOs to ideate strategies, plan roadmaps, and build use cases
  • Technology: building POCs, pilots and production solutions with clients
  • Infrastructure:  BLaaS – Blockchain Lab-as- a-Service (which allows clients’ internal teams to experiment and co-develop with Blockchain technology).
  • Blockchain network services : to build Blockchain networks

Use cases & POCs

Wipro has developed use cases and POCs across industries. In banking and financial services (excluding its insurance use cases), Wipro has focused its efforts on five critical use cases to date:

  • Banking:
    • Skip trace
    • Cross-border payments
    • Trade Finance
  • Capital markets:
    • Triparty collateral management
    • Delivery-versus-Payment (DVP)

Each of these use cases has active POCs deployed on Ethereum and Hyperledger. Blockchain POCs could potentially use additional technologies. For example, skip trace could be deployed in concert with Wipro HOLMES Artificial Intelligence Platform, to engage predictive analytics on where the skipped person may have gone to.

Business executives at clients are the primary buyers of Blockchain engagements. They are concerned with POCs which provide flexibility, quick deployment, and scalability. To facilitate achieving these goals, Wipro has been engaged in the following initiatives:

  • Flexibility and Quick deployment: Wipro has been developing a set of use case frameworks to identify what works, including required technical tools, business cases, and product ecosystems. These frameworks of best practices codify learnings as well as challenges to rapid, effective deployment of Blockchain technology
  • Scalability: Wipro has been a launch partner for the Enterprise Ethereum Foundation. In that capacity, Wipro has done extensive testing of scalability on various variants of Blockchain technology, including Ethereum and Hyperledger, which has provided it with the expertise to understand the possibilities and requirements for scaling a Blockchain solution for production grade enterprise level deployments.

Also, Wipro actively promotes and expands its Blockchain partnerships to broaden its capabilities in this rapidly developing ecosystem. 


The key to successful business use of Blockchain technology is the size of the network using the Blockchain. Network size is impacted by adoption, which is in turn impacted by cost incurred and potential value received. Successful technology services vendors must work on building that ecosystem with their clients for it to be successful. Technology services vendors will be able to have the biggest impact on cost reduction by reducing the ideation and buildout costs. However, insight into how technology interacts with business operations will provide precision into how value will be delivered. Value delivered is even more compelling for prospective network participants than cost issues in their decision process.

It will take several years for large-scale adoption of successful Blockchain ecosystems to be operational. The primary driver of successful adoption will be the development of large, effective ecosystems of participants. Technology services vendors have a large part to play in identifying a realistic roadmap and support the realization of that journey. 

<![CDATA[Adventures in Blockchain: Genpact Tackles O2C]]>

This is the first in an occasional series of blog articles over the next year on Blockchain initiatives related to the financial services industry. Blockchain is an emerging technology for which there are no current operational deployments, with initiatives still primarily at the consulting and design stage. Pilots have been deployed, but are relatively rare despite the rapid growth in experimentation and POC trials.

This article focuses on Genpact’s Blockchain initiatives, leveraging its extensive F&A operations experience to develop Blockchain capabilities that can improve financial outcomes, customer experience and operations costs. Genpact has decided to focus on order-to-cash (O2C) processing to begin with because it has the following characteristics:

  • Multi-party process, where coordination across parties for technology and process structure is currently lacking or customized on a bi-lateral basis, not on a universal basis
  • Lack of consistent data structure and data management frameworks between parties
  • Need to drive customer experience by providing operational transparency
  • Impact of the process on financial metrics like cash flow and bottom line profits for a company.

Genpact believes any successful solution for O2C will have:

  • Blockchain: distributed ledger, which will require counterparties to adopt a common taxonomy and technology platform. To encourage common adoption, it is necessary to minimize the cost and complexity of deployment and maintenance 
  • Smart contracts: computer protocols that get triggered based on specific events and are programmed to execute a sequence of actions. Smart contracts aim to provide security and to reduce transaction costs through automation.

Genpact has started developing the solution for the manufacturing industry, given its experience and client base within this industry. The manufacturing industry is looking to reduce the high costs of O2C processing. Even with a focus on reduced costs for superior performance, adoption challenges would have to be addressed until use of Blockchain becomes industry standard. Successful adoption requires both the buyer (manufacturer) and the vendor (supplier) to adopt a Blockchain platform. To facilitate adoption, Genpact’s approach is to segment the client’s customers to identify the few large customers who would be more willing to adopt this transformative solution given its benefits, and for whom this will deliver a significant percentage of the overall benefits.

Banks’ involvement in the payments part of the O2C cycle would automate the end-to-end process value chain. However, adoption by the banks should be easier, due to high levels of bank interest in Blockchain initiatives. Banks will benefit from improved customer experience in their payments service, and reduced risk from disputed payments.

Genpact is developing the solution on the Hyperledger Blockchain platform, an open source collaboration hosted by the Linux Foundation. Design work is done primarily at client sites in collaboration with client teams, with solution development done by Genpact teams in Palo Alto, CA and Bangalore, India. Development teams work virtually with client teams when joint development takes place. Genpact is currently discussing and working with multiple clients who want to be early adopters to develop different POCs.

Blockchain adoption is growing very rapidly for business case development and POC trials. Full operational deployment remains a future aspiration for all vendors of this technology and supporting services. Domain expertise and opportunity prioritization are critical to getting Blockchain initiatives off the ground. Genpact has developed a strategy to go after a highly focused target market with a high value proposition for its Blockchain initiatives. Next, it will need to convert early experiments into compelling operational business cases to drive adoption and a successful business. 

<![CDATA[WNS’ Banking BPS Strategy Focused on FinTech Service Enablement for U.S. Regional Banks]]>


NelsonHall attended the WNS analyst conference in New York last week for a business update and to hear about their current initiatives. Here I take a quick look at WNS’ banking industry business specifically, and at how it is focused on applying FinTech to BPS delivery to support large productivity gains for its U.S. regional banking clients.

Market conditions are driving clients, especially in banking, to rethink their business models, operations, and partnerships, and WNS believes it will need to cannibalize existing business to migrate its clients to more efficient digital operations. The willingness to cannibalize revenues has shown itself recently, with double-digit banking revenue losses by quarter Y/Y for the nine months ending December 31, 2016. However, banking processing volumes have increased in North America (primarily the U.S.) and U.K., while decreasing in its RoW markets (which represent half of banking revenues). The North American market is WNS’ primary target market for banking BPS, and increasing volumes in the region indicate that a strategy requiring legacy BPS delivery to be cannibalized by digital-enabled BPS is on track.

WNS’ strategy for the banking BPS market is to focus on regional banks in the U.S. market, primarily banks with $20 Bn to $150 Bn in assets. It has developed a set of tools (TRAC) which sit on top of legacy systems, draw data from silos, and deliver FinTech functionality to relevant processes and channels. WNS has decided to focus on its existing client base to deliver FinTech BPS across a much larger footprint within the client. This has resulted in an elongated sales cycle, which has also depressed short-term growth.

The strategy has begun to pay off, as demonstrated by a contract with a long-term banking client who for many years purchased only one process, credit spreading. This client has acquired 5+ banks in the past two years and has realized it needs to consolidate operations and aggressively improve operational delivery. WNS won the client’s BPS business (another vendor has the ITS remit) and WNS will now expand its operational footprint to cover deposit operations, mortgage originations, and retain credit spreading. Further expansion of the contract is expected.

Part of WNS’ commitment to cost reduction is underpinned by a pricing model, Total Relationship Discount Model, which guarantees cost savings under a non-FTE based business model. Under this pricing model, WNS commits to a set level of cost saving (e.g. 10%). WNS can decide where it will find the savings to optimize its processing, or the client/vendor can select additional areas to pursue wider dollar savings on additional processes. If WNS does not deliver the guaranteed level of savings, it will remit the difference to the client.

In summary, WNS is pursuing the right approach in targeting a very narrow segment of the banking market to pursue FinTech-enabled BPS. This will cannibalize revenues and slow the pipeline in the short run, as WNS and other vendors such as IBM have demonstrated in the past few years. However, in the long run, successful execution of this strategy will produce rapidly growing revenues as clients consolidate vendors to ones with domain expertise in emerging technologies and its application to sub-industry specific challenges. The alternative will be long-term business decline, as the current decline in legacy BPS accelerates.

<![CDATA[Mortgage & Loan Industry Challenged to Achieve Profits, but Turning to FinTech to Drive Efficiency Gains]]>


The mortgage and loan servicing industry is beginning a period of rapid change in the way business process services are delivered. Over the past few years, mortgage portfolios have not grown rapidly. For example, in the U.S., the largest residential mortgage market in the world, loans have grown only 7.3% from year-end 2012 to year-end 2016, a CAAGR of 1.8%. Some lines of loans have grown quickly, such as auto and education loans in the U.S. However, those loan pools are smaller than the mortgage pools and loan servicing requirements are less complex, both of which drive much lower revenues for processing services.

During the same time, regulations governing loan servicing have increased the cost of servicing by 14% CAAGR, according to the Mortgage Bankers Association. The increasing compliance costs of processing loans has led to banks and servicers exiting the business, notably CitiMortgage’s sale of 780k mortgages to New Residential Investment, due to close in Q2 2017. A separate contract with Cenlar to process the remaining Citibank mortgage portfolios will result in Citibank processing all its mortgages with third party vendors by 2018. In fact, according to the U.S. Government Accounting Office, from 2012 to 2015 non-bank mortgage servicers increased their market share from 6.8% to 24.2% of the market. The gains in market share by non-banks is attributed to the lower level of supervision of non-banks by regulators. Despite this, the economics of servicing are so bad that, in a review of the three largest non-bank mortgage servicers in the U.S., Moody’s found that only one of the three were profitable.

The bottom line is that the economics of this business are terrible, and eventually either lending will shrink or servicing operations must become much more efficient. We are seeing signs of vendors moving towards much more efficient methods of business process delivery for loans. These methods can deliver 40% cost reductions from the current standard of practice.  The methods employed to deliver efficiency gains rely on the use of FinTech solutions, but include a broad range of techniques, including:

  • Greater focus on employee training, which enables greater effectiveness in process execution, particularly when using digital tools to support external stakeholders (primarily customers, but including regulators, service providers, and management). Increased training increases the employment value of a worker and serves to enhance efforts in recruiting, retaining, and adapting the workforce over time
  • Increased investment in proprietary IP, including templates, frameworks, APIs, and methodologies. These serve to facilitate process reengineering and change management when business conditions change and the lender changes its portfolio of offerings
  • FinTech solutions which increase the level of automation and STP to reduce the overall cost of delivery. The key to modern digital solutions is the adaptability of solutions across environments. In the past, scripts were applicable to one task. Modern digital solutions can deliver automated execution across hardware, software, databases, and processes. Reuse of a single license across tasks reduces cost of ownership and increases flexibility of operations.

Banks have been focused on compliance challenges and sales efforts for the last five years. In the past year, banks have been turning to BPS vendors to deliver improved process efficiency for them. Delivering increased efficiency requires a deep dive into industry sub-processes, with an equivalent level of domain knowledge around technology, and yet finding individuals skilled in both areas is difficult. BPS vendors committed to process transformation as part of their services delivery are working to attract and develop those rare employees with dual skill sets. The result can be cost savings over 40%, versus traditional outsourcing cost savings of ~20%.

NelsonHall will publish a major market analysis report and NEAT vendor evaluation for next generation mortgage and loan BPS services in late Q2 2017 to address these issues in greater detail.