New frontiers in eFinance: Redefining the Banking franchise

1
New frontiers in e-Finance Redefining the
Banking franchise

• Eduard Ritscher
• Vice President and Managing Principal
• Unisys North America Financial Services
• BAFT
• Sao Paolo, April 2001

2
The Agenda

• e-Finance A view from the trenches
• From e-Business to e-Finance
• e-Finance innovation
• e-Payments Payments
• Payments Integration with the B2B exchanges

3
e-Finance A View from the Trenches

• What we see in the financial e-marketplace
• Innovation
• a lot of creativity slowly absorbed by the
  industry
• Market Awareness
• uneven Adoption rate of the e-Finance model
  across market segments and geographies
• Changes
• some may lead to radical Industry Transformation
• Market Sentiment
• shift fromirrational exuberance to viral
  skepticism
• Confusion
• between what is Strategic and what is Transition
  in e-Finance
• Industry-wide Initiatives
• Commitment to protect the existing and build a
  new franchise

4
e-Finance innovation is challenging the FS
industry

• Bankers no longer control the process on key
  issues affecting their industry.
• The industry lacks a set of Best Business
  Practices to track and monitor the e-Finance
  technology and business innovation.
• Must learn to assimilate Change and make it work
  in its favor
• Challenges of converting e-Finance in a revenues
  stream
• e-Finance will dominate the Banks corporate
  development Agenda
• Achieving sustainable economic models
• self-funding, multi-tiered growth models which
  tie the expenses to the operating income growth
  (eTrade)
• a radically new business model (Online Brokerage,
  eBay)
• extreme adaptability to shifting market
  conditions
• The Banks technology organization must maintain
  its own relevance

5
The e-Finance What it is?

• e-Finance addresses the fundamental
  transformations to the environment in which
  Financial Services are delivered over the Net,
  including Business and Technology elements that
  define them
• It is about business and
  technology
• e-Finance is about the re-engineering of the
  Financial Process under the e-Business paradigm
• It is about Business Process Re-engineering
  and Change Management
• Focus on secure financial transactions over the
  open public network among ad-hoc authenticated
  parties engaged in complex business interactions
• A broad portfolio of services for a new
  operating environment
• Recent innovation in e-Finance captures the
  essence of recent changes in the e-Business model

6
A successful model for the B2B exchanges

• An ideal exchange should be big, highly liquid,
  with a lot of Buyers and Sellers, offering
  reliable procurement and dynamic pricing
• Full integration of Payment component with trade
  transactions
• A balanced Pricing model between Buyer and Seller
  propositions
• Back-End integration with ERP and the Payments
  infrastructure
• Dynamic Pricing to guarantee the sale
• All exchanges need a robust Financial Component
• Pressure to create Liquidity and increase Trade
  Volume
• Integration with the Financial component and the
  ERP (A/P, A/R, G/L,Payments, Cash Management)
• Ability to Price to Value
• Customized sale experience both for Buyers and
  Sellers
• Better integration with the Supply Chain
• Financial Institutions become active players in
  the B2B exchanges

7
New Frontiers in e-Finance Payments
Integration with the Net Exchange

• e-Finance integration with e-Procurement and
  Supply Chain
• Help increase the liquidity in the exchanges
• Combine Credit decision, Debt Origination and
  Escrow functionality, all online
• Credit Finance reduces the Cost of Capital and
  Cost of Funding
• Reduce the risk for e-Lenders
• Reduce Clearing and Settlement Risk in low and
  medium value payments
• Expedite cash-flows and create working capital
  in the e-exchanges
• B2B Exchanges Payment and Fulfillment must be
  linked
• Returned Items Exception Processing lost
  revenues
• Payments interfaces with Payor A/P , Payee A/R
• Need to reconcile to the G/L
• Online Payments to increase liquidity and cash
  flow

8
e-Finance What is in the pipeline

• Realignment and market restructuration
• Component Vendors become Solutions Providers
• FSI seeking Strategic Partnerships
• Focus on Integration and aggregation
• The disappearance of the Frontier
• Do FSI know enough today about the e-Finance and
  what it can do for Business and Customers to the
  point that it can be turned into a core function?
• Stop worrying about disruptive technology and
  start manage a disciplined integration
• When frontiers disappear, the battle for
  franchise begins
• In e-Business there will be only two types of
  companies those who build it and those who adopt
  it
• In e-Finance, Banks seeking to build new
  franchise have only one choice.

9
e-Finance Looking ahead

• Rapid Marketplace rationalization
• If you do not know where you go, all roads will
  bring you there
• Components are being fit into an architecture
• Increasing level of productization e-Business
  companies become Software vendors
• Technology vendors become strategic partners.
• Increasing threat from Telcos and ISPs, and
  disappearing boundaries between e-Business and
  e-Finance
• Emergence of industry-wide e-Finance consortiums
  
• Identrus, SWIFT/Bolero, FSM.com, fmXML
• e-Finance start to build momentum in the mass
  market
• It is not so much about being first but being in
  the game.
• We are only ten minutes in an all night poker
  game.