Branch

cisco

Branch

© 2004 Cisco Systems, Inc. All rights reserved.

Financial Services Industry Session

Rainer Muhm

Key Account Manager FSI

1


Strategy in Vertical Markets

Continue to Add Value

Product Solution

© 2004 Cisco Systems, Inc. All rights reserved.

Cisco today

(and tomorrow)

End-to-End

Network

Cisco tomorrow:

Network Relevant

Business Solutions

Branch of the Future Initiative

BASEL II => Risk Management

- Business ready Datacenter

- Self Defending Networks

IT Business

2


Financial Services Industry

Branch challenges today

© 2004 Cisco Systems, Inc. All rights reserved. © 2003 Cisco Systems, Inc. All rights reserved.

3


Some Problems Faced by Retail Banks

More

channels

New non-traditional

competitors

Disintermediation

© 2004 Cisco Systems, Inc. All rights reserved.

Lower customer

loyalty

(defection)

EXTERNAL

PRESSURE

Price-based

competition

Customer transfer

to lower cost

channels

Cost pressures

Product

commoditisation

4


Some Possible Reactions

Lowering cost

to serve

Specialization

New financial

products

© 2004 Cisco Systems, Inc. All rights reserved.

Understanding

your

Customer needs

INTERNAL

CHANGES

Differentiation

Focus on customer

profitability

Channel

coordination

Increasing

added value

5


Why Branch Transformation Now?

• 80% of consumers prefer

branches

• 50% of retail banking profits

come from branches

• Renewed banking focus on

branch

• Very little investment in

recent years. Not

“fashionable”

© 2004 Cisco Systems, Inc. All rights reserved.

Personal Visit

Phone

Internet/ E-mail

Mail/ fax

Source: Datamonitor

4%

3%

11%

Europe

Sweden

Italy

UK

France

Spain

Germany

79%

0% 20% 40% 60% 80% 100%

6


Drivers in Retail Banking

On-line

Banking

Mail/Fax

Picture © 2000 Greater Philadelphia Tourism Marketing Corporation.

© 2004 Cisco Systems, Inc. All rights reserved.

Branches

Customer

TV/WAP

access

Call

Centres

ATMs

• Customers will use every available

channel based on perceived value

and transaction type

• Reduce cost per contact while

pushing a customer-centric model

• Need integrated business

process: “Multichannel” & CRM

focus

• Leverage enterprise-wide

resources

7


Difficulties

• Different Channels: Different IT

“Languages”

• Information Silos – not shared

• Not leveraging added value of each

channel

• CRM has been used as a cost saver:

Call centre

• Requirements to change:

• Proactive customer advisors

• Mobility, Interaction and

Collaboration

• Culture

• Training and communication

• IT is key to enable change

© 2004 Cisco Systems, Inc. All rights reserved.

8


New Branch: Customer Advisory Center

Branch: Expensive channel for processing reactive

transactions but a strategic one for managing and expanding

relationships with the customer base

© 2004 Cisco Systems, Inc. All rights reserved.

BRANCH

OFFICE

9


What Is The First Step?

• As always, HR and processes are critical

but…

• IT is the main pillar to support this change;

networking is the enabler

© 2004 Cisco Systems, Inc. All rights reserved.

10


Evolution of Branch Applications

Architecture

Old Branch Architecture

Server Dependent Architecture

OS/2

Client

OS/2

Server

Traditional Branch Architecture

• Transaction-Centric

• Client-Server

• OS/2 or Windows Banking Platform

• Heavy Client

• Poor or No Integration with other Branch

Elements

© 2004 Cisco Systems, Inc. All rights reserved.

Network

Data

Center

New Architecture

Flexible IP Based Architecture

ATMs

Branches

Pervasive Pervasive

Devices

IP Telephony

IP Video

Surveillance

New Branch Architecture

• Windows, Linux, Thin Client?

• Java Based, Not dependent on local

servers

• CRM enabled workstations

• Full integration with all branch elements!

• Customer centric

• Multichannel, not just multiple channels

Legacy Systems New Systems

Internet

Distributed Distributed Call Call

Center

Data

Center

3rd Party

Apps

11


Branch 1

Branch 2

Communications Transformation to a

Converged Network

Data

Network

Old Branch Architecture

• Multiple, single-service overlay networks

—minimal resiliency

• Costly, slow new application deployment

• High maintenance costs

• Poor scalability

• Difficult to deploy new applications and

services

© 2004 Cisco Systems, Inc. All rights reserved.

Voice

Network

ATM

Network

Video

Network

Internet

Data

Center

Corporate Intranet

ATMs

Branches Branches

Pervasive

Devices

IP Telephony Telephony

Distributed Call

Center Option

IP Video Video

Surveillance

Internet

Data

Center

New Branch Architecture

• Integrated, multi-service networks—solid

resiliency

• Rapid, simplified deployment

• Lower TCO (deployment, maintenance,

provisioning…)

• Bandwidth scale

• Agile support for business requirements

• Nimble

Yesterday’s Networks Intelligent Network

3rd Party

Apps

12


Server Consolidation - Before

DWDM

Data Centre 1 Data Centre 2

© 2004 Cisco Systems, Inc. All rights reserved.

Leased Line or Frame Relay

Network / ISDN Backup

• High Availability Network

• Network limited by physical

design

• Limited Bandwidth

• Limited services

• Multi-level design (sometimes)

• Server-dependent Branch

• Remote Processing

• Little (if any) Integration of

Branch Services

• Transaction-oriented

processing

13


Server Consolidation - After

DWDM

Data Centre 1 Data Centre 2

3rd Party Services IP Based Network

IIN

© 2004 Cisco Systems, Inc. All rights reserved.

Network becomes even

more business critical

• Fault Tolerant Network

• New Services

• Any IP to Any IP communication

• Network reflects business reality

• Possibility of “Server-less”

Branch

• Remote Processing

• Full Integration of all Branch

Services

• Customer Centric

14


Enterprise-Wide: Integrated

Delivery Channels and Applications

Retail

Banking

Insurance

Customer

Contact Center

Securities

3 rd Party

Services

© 2004 Cisco Systems, Inc. All rights reserved.

Branch

Internet

ATM

Common Enterprise

Architecture with Consistent

Network Services

Data

Warehouse

Data Mart

Data Analysis/

Reporting

Self-Service

Kiosk

Wireless

Access

B2B

Community

15


New Needs

• Customer pricing pressure for lower cost bandwidth

• Higher Bandwidth Requirements

- New IP Based-Applications

- Server reduction/elimination

- In branch CRM deployment

• Integration of branch channel to other customer touch

points:

© 2004 Cisco Systems, Inc. All rights reserved.

- New Services needed to become customer-centric

• Audio conferencing

• Virtual Call Centre

• ATM Integration in Branch

• Video Surveillance

• Collaboration

• New types of Advertising

Outsourcing

• Outsourcing

16


Cisco Solution: Branch of the Future

© 2004 Cisco Systems, Inc. All rights reserved.

17


IP Telephony

• Add business value by integrating

applications and telephony:

Collect all customer “touches” on CRM systems

Display customer information dynamically

• Leverage enterprise-wide resources by

virtualising the call centre & telephony

systems

• Eliminate redundant costs for voice & gain

flexibility:

Converged IP network for voice, toll savings

Simplify add/moves/changes

• Telephone dashboard provides branch

employees with productivity application

delivery

© 2004 Cisco Systems, Inc. All rights reserved.

18


Customer Care

• Provides core technology for “customer centric”

operations

• Intelligent handling of customer contacts based on

business rules

• Delivers skills-based routing

of calls

• Manages all centralized

customer calls

• Delivers unified messaging

Productivity everywhere in the

enterprise

© 2004 Cisco Systems, Inc. All rights reserved.

19


IP Telephony – Business Value

• Cost Savings:

© 2004 Cisco Systems, Inc. All rights reserved.

Toll Charges, Maintenance, Flexibility

• Improved Customer Satisfaction:

Leverage Cross Bank Resources

Talk to Call Centre, Branch, Specialist or IVR

• Improved Employee Productivity

Use CRM/Contact database to determine business value of call

Leverage Advanced Facilities:

Voice Mail

Conferencing

Calendaring

20


Video Calls At Branch With Collaboration

• Remote access to branch

experts

• On-net calls for “free”

• Integration of a variety of endendpoint devices (IP, ISDN, etc.)

• Simple call setup

• Business Value:

© 2004 Cisco Systems, Inc. All rights reserved.

Leverage resources, increase sales of complex products,

reduce travel expenses

21


Content Delivery Network

• Centrally managed, transparently

delivered and locally stored content

• Enable CRM at branch

• Enable e-learning, new product

introduction

• Enable “heavy” content delivery

E-learning, new product introduction

Multimedia, presentations,

documentation, etc

• Enable multimedia advertising

• Caching and load balancing for the

most efficient and cost-effective use

of networking application services

© 2004 Cisco Systems, Inc. All rights reserved.

Web

Learner

Based

22


E-Learning / Compliance

© 2004 Cisco Systems, Inc. All rights reserved.

• Personal training

plan for each

employee, anytime,

anywhere learning

• New product,

orientation,

compliance training

and tracking

23


Advertising

• In-store advertising to

educated and

cross-sell

• Centrally managed

campaigns

• Revenue stream from

3 rd rd-party -party

adverts

• Ability to target individuals

with specific campaigns when

they enter the branch

© 2004 Cisco Systems, Inc. All rights reserved.

24


Corporate Communications

• Knowledge Sharing

• Consistent Message

• Higher Employee Morale

• United Alignment

© 2004 Cisco Systems, Inc. All rights reserved.

25


CDN – Business Value

• Cost Savings:

© 2004 Cisco Systems, Inc. All rights reserved.

Delayed/Controlled bandwidth Upgrades, CRM

Caching (1:10!),

E-Advertising, e-learning, ATM software distribution

• Improved Customer Satisfaction:

Branch Advertising, faster go-to market

• Improved Employee Productivity

E-learning at the branch

New Product Introduction

26


IP Self Service: ATM and Kiosk

• Integration of branch ATMs and

kiosks with all other delivery channels

• Encourage self-service behavior

• Localized and personalized customer

messaging: CRM

• Deliver revenue generating

advertising

• Integrate telephony, wireless for better

customer service and flexibility

• Reduced network costs, especially

off-site ATMs

© 2004 Cisco Systems, Inc. All rights reserved.

27


Wireless

• Mobile secure delivery of

customer service within

branch

• Enable new services for

channel integration

• Flexibility & cost savings in

branch layout

• Wireless messaging over cell,

pager, etc.

© 2004 Cisco Systems, Inc. All rights reserved.

28


Wireless - Employee and Customer Mobility

© 2004 Cisco Systems, Inc. All rights reserved.

• New Services for Branch

• Recognise & provide

customer value

• Flexible Branch Layout

• Provide employee

specific info & context

specific support

• Enable mobile worker

force: SMB and affluent

customer sales

29


Wireless – Business Value

• Cost Savings:

© 2004 Cisco Systems, Inc. All rights reserved.

Cabling, Branch Layout Flexibility, Wireless device

enablement

• Improved Employee Productivity

Mobile SMB/ High net worth employees can use

branch

Mobility in branch areas

30


New Systems:

Branch & ATM Security/Surveillance

• Optimise surveillance process

IP Improves process vs VCR tapes

Centralise surveillance & storage at

any location and remote ATMs

• Providing

Alarms & Triggers

Wireless distribution to Law

Enforcement

Immediate access to archive

elimination of manual intervention

© 2004 Cisco Systems, Inc. All rights reserved.

31


A Glimpse into the Future…

The Ethernet Powered Organization

Wireless Access Points

Resilient, Available IP

Network with Scalable

Power Delivery

© 2004 Cisco Systems, Inc. All rights reserved.

Fire Protection

Powered IP

Telephone

IP Integrated Video

Surveillance

Building

Access

Control

Power over Ethernet (PoE)

Delivers 48V DC Power

over a Standard Copper

Ethernet Cable

The Power and Network Is

Used by the Connected

Devices for Their Operation

32


Physical Security – Business Value

• Cost Savings:

© 2004 Cisco Systems, Inc. All rights reserved.

Integration of security elements in branch and

remote management, cabling (electrical, video)

Cameras, Alarm Systems, Badge Readers, lights

• Improved Customer Satisfaction:

Higher security

• Improved Employee Productivity

Remote Management, access to any branch, higher

security, faster event resolution

33


The network enables the business

Cost

© 2004 Cisco Systems, Inc. All rights reserved.

Single-Purpose

Architecture

Enhanced features

Capability barrier

Security

Performance

TCO

New

capabilities

Capabilities continuum

Converged Architecture

Transformative solutions

34


Branch Applications Solving Customer Needs

© 2004 Cisco Systems, Inc. All rights reserved.

Cost

Reduction

Improved

Productivity

Solution

Available

Branch Connectivity � � �

ATM Improvements � � �

Virtualising Call Centre � � �

E-advertising � � �

E-learning � � �

CRM Enablement � � �

Videoconferencing � � �

Employee Mobility � � �

IP Video Surveillance � � �

Voice Recording � � �

35


The total is greater than the sum of the parts

Physical Security

IP Contact Centre

IP Telephony

Wireless

Content Delivery

Cisco Routing

and Switching

© 2004 Cisco Systems, Inc. All rights reserved.

• Optimised Surveillance Process • Centralised Video Storage

• Process Optimisation

• Centralised Management

• Higher Productivity

• Higher Security

• Enterprise Virtualisation

• Intelligent Call Routing

• Toll Cost Savings

• Easier Adds/Moves/Changes

• Secure Wireless

• In Branch Mobility

• New Application Delivery

• CRM Enablement

• E-Learning

• E-Adversing

• VPN

• Firewalling

• Intrusion Detection

• Cell Centre Virtualisation

• Telephony Resiliency

• Application and Telephony

Integration

Branch Layout Flexibility

• Employee Mobility

• Remote Video Surveillance

• Heavy Content Distribution

• Bandwidth Optimisation

• QoS

• SNA & Legacy protocols

• Manageability

36


Financial Services Industry

Global Regulatory Changes

© 2004 Cisco Systems, Inc. All rights reserved.

37


Changing Global Regulatory Environment

• Basel II and CAD3 (EU) Capital Accords

• International Accounting Standard

• Securities & Exchange Commission

(SEC)

– Sarbanes-Oxley Act (SOX)

– Electronic Message Storage

– Business Continuity Planning

• Privacy Regulation

– Bank Secrecy Act

– Gramm-Leach-Bliley Act (GLBA)

– Fair Credit Reporting Act (FCRA)

• Check Clearing for the 21st Century Act

(Check 21)

•© 2004 Homeland Cisco Systems, Inc. All rights Security: reserved. Patriot, Patriot II

38


The New Capital Adequacy Framework

3 Pillars Structure of Basel II

© 2004 Cisco Systems, Inc. All rights reserved.

The

New Capital Adequacy Framework

Minimum Capital

Requirements

Supervisory

Review Process

Market

discipline

39


Objectives and Improvements

from Basel 1 to Basel 2

• Improve credit, market and operational risk

management to create more stable financial system

• create financial incentive for better business conduct

in the form of reduced capital requirements

• specific for different type of Business (retail banking,

investment banking etc.)

• Flexible Rating Methods

• Inclusion of Operational Risks

© 2004 Cisco Systems, Inc. All rights reserved.

40


Basel II Framework

Minimum Capital Requirements

Standardised

Approach

(external ratings)

Unchanged

Reclibrated

© 2004 Cisco Systems, Inc. All rights reserved.

Simple

Approach

Comprehensive

Approach

Capital

Requirement

(min 8%)

Credit Risk Market Risk

IRB-Approaches

(Internal Ratings)

Minor Changes

New

Foundation

Approach

Advanced

Approach

Operational

Risk

Basic Indicator

Approach

Standardised

Approach

Advanced

Measurement

Approach

41


Risk Management - Motivations

Avoid

Loss

© 2004 Cisco Systems, Inc. All rights reserved.

Take

Cost

out

Optimis

e

Process

Gain

Compliance

42


Potential Losses of Denial of

Service attacks

Business

Type

Exposure /

hour

Source:

“Electronic Security: Risk Mitigation in Financial Transactions,”

The World Bank, Thomas

Glaessner, Tom Kellermann, Valerie McNevin, June 2002.

© 2004 Cisco Systems, Inc. All rights reserved.

Brokerage Firm

$7,8Million / hr

Credit Card

Authorization

Company

$3,1Million / hr

ATM loss of

fees

$ 18.000,-

Airline

Reservation

$ 108.000,-

43


Specific Costs of Non Compliance

Bank

Lloyds TSB

Abbey

National

Bank of

Scotland

© 2004 Cisco Systems, Inc. All rights reserved.

Reason for Non

Compliance

Fine

High income

Bond Miss

selling

Money

Laundering

Money

Laundering

Fine $

£1.9m

£2m

£1.25m

Comments

An additional £98m paid in

customer compensation.

Inadequate training

An additional 320k for Systems

and Control Breaches

Records submitted by BoS were

incomplete

44


Benefits for Banks

• Revenue protection and continuation

• Protection from financial loss

• Efficient business continuity

• Controlled liability

• Proactive Regulatory Compliance

© 2004 Cisco Systems, Inc. All rights reserved.

45


Penalties for Non-Compliance

• Potential Liability is Staggering:

FDIC insurance terminated

Fines up to $1M

Criminal penalties for fraudulent access to sensitive information

• Business Risks:

Loss of client trust

Liability for civil actions

Business continuation

Loss of data or intellectual property

© 2004 Cisco Systems, Inc. All rights reserved.

46


What Is Operational Risk?

IT related risks are (just) one part of operational risks,

but accounting for a major part of severe losses…

© 2004 Cisco Systems, Inc. All rights reserved.

IT Risk

IT Security

and

Availability

Operational Risk

47


Internal or Advanced Measurement

Approaches Call for Action Now

© 2004 Cisco Systems, Inc. All rights reserved.

Timetable for Basel II Implementation

2003 2004 2005 2006 2007 2008 2009 2010

Source: Deloitte & Touche

48


A Proactive Self-Defending Network is Needed!

Protect against today’s real-time dynamic threats with:

• Automated & proactive security solutions

• Integrated security on all devices & applications

• Centralized monitoring, management & control

• Coordinated and rapid response to threats

© 2004 Cisco Systems, Inc. All rights reserved.

49


Architecting for Business Resilience

© 2004 Cisco Systems, Inc. All rights reserved.

Net Impact Networked Virtual

Organizations are Agile

• Mobility and IP communications increase

productivity

• Innovative IP applications enhance agility

• Storage Networking provides backup and

recovery

• Networked security protects business

information and assets

• Converged infrastructure enables IP telephony,

telecommuting, and video for cost reduction

• Diversified IP communications reduce risk

• Distributed architecture provides resilience, not

just availability

• Network intelligence ensures adaptability and

flexibility, while reducing complexity

50


Achieving Business Continuance

in the Face of Disruption

Business

Continuance

• Ensure Non-Stop

E-Business

• Protect Distributed

Information Assets

• Recover Rapidly

from Disasters

• Achieve Continuous

User Access

© 2004 Cisco Systems, Inc. All rights reserved.

Net Impact

Business Protection

• Protect Business Operations

Against Directed Attacks

• Prevent Damage from

Worms and Viruses

Business Agility

• Maximize productivity

and organizational

flexibility

• Decentralize and

mobilize resources

• Enable virtual

organization

51


Planning for Business Continuance

Business Need

Enable Non-stop

E-Business Applications

Protect Information

Assets Locally and

Remotely

Ensure Rapid Recovery of

Mission-critical

Information and Systems

Ensure Continuous

End-user Access to

Applications

© 2004 Cisco Systems, Inc. All rights reserved.

Technology Enablers

Highly Available End-to-end

Data Center Infrastructure

Tape Backup and Remote

Asynchronous Data Replication

Synchronous Disk Mirroring

And Data Center Mirroring

Virtual Private Networks and

Site-to-site Load Balancing

52


Global Bank: Deploying an Enterprise-Wide

Business Continuance Plan

Access

Workgroup

Storage

Network

FC

Core

Data Center

Storage

Network

SN 5428

NAS

MDS

9500

FC SAN

Tape

© 2004 Cisco Systems, Inc. All rights reserved.

Enable Protect Enable Rapid Information Corporate Non-Stop Recovery Data E-Business

Assets from Assets Disaster Remotely

RAID

WAN

Edge

Internet

Intranet

WAN

Remote

Data Center

MDS

9216

Remote Offices

High Availability Data Center

Consolidated Tape Backup

Remote Asynchronous Replication

Synchronous Disk/DC Mirroring

Optical MAN MDS

9216

Backup

Data

Center

53


Global Bank: Ensuring Continuous Access for

Employees, Customers and Partners

Access

Workgroup

Storage

Network

FC

Core

Data Center

Storage

Network

Ensure Continuous Access to Applications and Data

SN 5428

NAS

MDS

9500

FC SAN

Tape

© 2004 Cisco Systems, Inc. All rights reserved.

RAID

WAN

Edge

Internet

WAN

Remote

Data Center

MDS

9216

Remote Offices

Optical MAN MDS

9216

Ubiquitous Internet

VPNs

Load Balancing

Mobility

Backup

Data

Center

54


How We Can Capitalize on

the Opportunity

© 2004 Cisco Systems, Inc. All rights reserved.

55


Financial Services Market

A HUGE VERTICAL SALES OPPORTUNITY

for YOU with CISCO SECURITY

TRUST RISK MANAGEMENT COMPLIANCE

© 2004 Presentation_ID

Cisco Systems, Inc. All rights reserved. © 2003 Cisco Systems, Inc. All rights reserved.

56


New Sales Opportunities

• New regulations and more

competition create business

opportunities

• Emphasis on proactive

compliance and risk

management requires

technology solutions

• Cisco ® has developed key

security solutions to address the

needs of financial institutions

© 2004 Cisco Systems, Inc. All rights reserved.

57


Basel II: Global Spending Forecast

North America

Europe

Asia-Pacific

US$ Billion

© 2004 Cisco Systems, Inc. All rights reserved.

S7.00

S6.00

S5.00

S4.00

S3.00

S2.00

S1.00

S-

Source: Celent Communications

2002 2003 2004 2005

58


A Self-Defending Network Will Enable Many

Future Sales Opportunities

WIRELESS MOBILITY

© 2004 Cisco Systems, Inc. All rights reserved.

VOICE AND IPC

SALES

ELECTRONIC MARKETING

CUSTOMER CARE

59


Cisco Marketing Activities

• International Banking Team

specialised in Banking & Insurance

• Ready to go Marketing-material

Branch of the Future Demo Lab in

London

• Success Stories

• Seminars to come next Year:

Branch of the Future

Operational Risk Management

Business ready DataCenter

© 2004 Cisco Systems, Inc. All rights reserved.

60


Thank you!

© 2004 Cisco Systems, Inc. All rights reserved.

61

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