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Overcoming the Challenges of Modernizing Core Banking Systems Banking Vietnam, an IDG event Anselm De Souza Vice-President, Asia Pacific Sales System Access Limited, Singapore 17-19th May 2006, Melia, Hanoi, Vietnam Agenda Introduction Key Questions Why Change Selection Criteria Overcoming the challenges Key Success Factors Case Study – the Vietnam International Bank Introduction Key Questions Why were Vietnamese banks taking extended period to roll-out their core systems What were/are the challenges Vietnamese Banks faced when modernizing core systems? Is this situation specific to Vietnam? How can we do it better? Questions to ask Should we change? Why? How do we choose? What are the criteria? How do we prepare for change? Should we change? Why? Vietnam Banking EnvironmentOverview Vietnamese Banking Environment - Overview Vietnam economy grew 8.4% in 2005 State’s 10-year Development Plan for the Banking Industry Adopt international banking and business best practices Better corporate governance Market-based monetary management Modernization of common systems Promote Public Trust in the banking system Vietnamese Banking Environment - Overview The World Bank’s initiative to modernize the Vietnam Banking Industry Vietnam is still largely unbanked 45% of money in cash >50% of local business transactions done outside the banking system Only 1.3 Million Bank Accounts Rationale for Acquiring New Core Banking Systems Rationale for Replacement of Legacy CBS Entry of foreign competition Increase Customer Sophistication Adoption of international best practices Delivery of international banking products Faster go to market More stringent regulatory requirements Time is of the Essence! Rationale for Replacement of Legacy CBS Opportunities for growth in the banking sector are so big that “local speculation in banking shares is running hot and heavy here on expectations that big foreign banks will buy into smaller local state-owned commercial banks toward the end of the year.” -- Asia Times Online, April 19, 2006 Costs Sample Benefits Sample Costs -Benefits How do we choose? Criteria for Selection of Core Banking Solutions Selection Criteria Product Functionalities Technology & Architecture Implementation Track Records Local Support & Vendor’s Commitment Price Selection Criteria Product Functionalities Sufficient Functionality Coverage Technology & Architecture Scalability Flexibility Ease of Integration Interoperability with existing systems Security Selection Criteria Implementation Track Record Global expertise and domain knowledge Local project implementation experience Selection Criteria Local Support & Vendor’s Commitment Tried and tested post-implementation support strategy Local Product Support Local Office Selection Criteria Price Minimal Customizations on International CBS product Short Implementation Time Multi-dimensional criteria for SW package evaluation & selection Functionality Technology Architecture Vendor viability Implementation and support Total Cost of ownership Transaction Management Information Management Risk Management Etc… Support of presentation layer Support of Databases Support of Middleware Support of Operating Systems Support of Hardware Toolset to facilitate implementation Maturity Reliability Scalability Integration with other systems Financial Viability Number of implementation sites Industry Reference Years of existence Commitment to technology and retail industry Pre-configured Solution Supportability Availability of implementation and support consultants User Training Ease of Use Support for multiple languages Interface with desktop tools Cost of Software Cost of Hardware Consulting Cost Cost of Integration Evaluation Criteria …evaluation and summary of findings 2 4 6 8 10 2 4 6 8 10 2 4 6 8 10 2 2 2 4 4 4 6 6 6 8 10 8 10 8 10 Functionality Technology Architecture Vendor viability Implementation and support Total Cost of ownership Package 2 Package 4 Package 1 Package 3 Numeric Scoring Methodology A Mathematical Model based on the evaluation criteria A weightage is given to each criteria A Balanced Score is computed ILLUSTRATIVE How to over come these challenges? Challenges To reduce evaluation process – more time to implement To implement clear & objective evaluation scoring system Look beyond the typical focus Product Fit Technical Functional Project Timeline Price Note on Pricing “Project delays are very costly. The opportunity costs of any delays usually erode any benefits of the initially competitive financial proposition and more. -- Mr. Trinh Van Tuan, VIB Chairman Key success factors Internal Commitment Top down support Adequate Resourcing 20-30 staff typically involved in project implementation whilst managing day to day activities Strategic HR changes Talent spotting Change management Redesigning jobs & roles Business Process Re-engineering Key success factors Vendor management Management commitment Adequate resourcing & project management Partner strategy (one team, one goal) Bank staff & Vendor integration Culture and language Case Study: Vietnam International Bank About VIB Vietnam International Bank (VIB) Started in September 18, 1996 with an initial paid-up capital of 50 billion VNDs At the beginning of 2005, chartered capital had amounted to 325 billion VNDs 5th Largest Joint Stock Bank in Vietnam Goal to achieve very challenging growth targets for the next 10 years “Our bank has set out a plan to expand the current branch network of 34 branches, grow total assets, grow the number of customers, and widen range of products and services. This plan will ensure VIB attains a balanced portfolio of assets to strengthen the banks financial stability, a diversified sources of income as it achieves its growth targets”. -- Mr. Trinh Van Tuan, VIB Chairman The Major Objectives Rigid & Short Implementation Time Frame “Big Bang”, simultaneous Live sites VIB Selection Criteria Legacy Core Banking System Aging technology that cannot sustain growth VIB’s Stringent Selection Criteria Rich Functionality and Flexibility Robust Technical Specifications Operational Compatibility Technical Scalability Professional Service Standards and Management Support Other Key Issues Faced Partner Issues Choosing the right solutions partner Language and cultural barriers Coordinating Team members separated geographically Product Issues Support international banking product offering and also local practices and processes Local language support Rapid implementation How the eventual vendor was chosen Selected from among several international banking vendors including the Top 5 global solution providers Track record of successful project delivery On-Time and On-Budget. Domain Knowledge and Understanding of VIB’s business What VIB looked for in a partner “We are a bank, and project delays are very costly. The opportunity costs of any delays usually erode any benefits of the initially competitive financial proposition and more. We want a partner who will deliver on their promise. After thorough reference checks and site visits, the VIB team found that customers of System Access spoke highly of the company’s immense desire to work closely with the bank and deliver in the given timeline.” -- Mr. Trinh Van Tuan, VIB Chairman Project Approach Both parties agreed on “Bank in a box” Approach Vietnamese Localizations Minimal Customization International best practices & business process Thorough training (knowledge transfer) Introduction of Factory Acceptance Test Full onsite support How Partner rose to the occasion Domain knowledge and Expertise to provide a Localized International CBS product Flexibility of the product that is a readily customizable international product suitable for Vietnam banks Complete understanding of the issues and challenges that arose Hurdled the cultural and language barriers Solid Project management Successful Live Operations! On 14th April 2006, SYMBOLS went LIVE at VIB. In only 10 months, VIB is now serving More than 70,000 customers Network of 34 branches, and Covering more than 2000 KM throughout Vietnam using SYMBOLS CBS. VIB is now set to Expand and Acquire an even Bigger Domestic Customer Market share. VIB is now ready to compete aggressively against bigger foreign banks when they enter Vietnam. About Speaker Anselm de Souza Vice President, Sales Asia Pacific 22 working experience in Financial Services Industry Senior Regional Positions in: Callatay & Wouters (Core & Private banking) CashTech (Cash management) S1 (E-Banking solutions) FICS (Corporate Banking Solutions) Dow Jones Marshalls Money Brokers System Access At A Glance Incorporated in 1983 – Focus on Banking Software Development & Implementation 300+ staff across 13 Regional Offices in Bangkok, Beijing, Shanghai, Hanoi, Tokyo, Kuala Lumpur(x2), Bangladesh, Bratislava, Dubai, Manila, Prague, and Karachi 150+ banks in more than 25 countries across Asia Pacific, Middle East, Africa and Europe. Major Shareholders – Management, IDA, Warburg Pincus & Private Investors Listed in the Singapore Stock Exchange