HIGH-TECH AND HIGH-TOUCH BUSINESS LENDING AT RABOBANK

Erik PasschierEVP, Manager IT Domain Lending & Insurance, Rabobank

Balancing act between High tech and Human Touch

Business innovation together with Pega

Erik Passchier, June 5th 2017PegaWorld Las Vegas

Contents

• Introduction to Rabobank

• Rabobank Strategy

• Business Lending in the Netherlands

• Positioning Pega at the Rabobank

• Pega at work at the Rabobank

• Conclusions and Outlook

4

Introduction to Rabobank

Rabobank cooperative banking

Annual summary 2016• Net profit 2,024 (million EUR)• Total assets 662.3 (billion EUR)• Comm. eq. Tier 1 14.0 %

Ratings 2016• S&P A+ • Moody's Aa2 • Fitch ratings AA-• DBRS AA (high)

more info: www.rabobank.com

Rabobank marketshare Netherlands

Net Profit

2.2 billion

2 bilion

2015 2016

Mortgages Savings Business lending

Rabobank strategy

CustomerDistribution / Front Office

Manufacturing / Back Office Market Infrastructure

Individual

Institution

Inve

stin

g /

Wea

lth M

gmnt

Pers

onal

Sa

ving

sLe

ndin

gCa

pita

l Ra

isin

g

Source: based on illustration ‘Financial Services Value Chain Supermarket Age’ by Doug Nelson, Capgemini Consulting= flow of capital

Value chain that we were used to…

Paym

ents

CustomerDistribution / Front Office

Manufacturing / Back Office

Market Infrastructure

Individual

Institution

Inve

stin

g /

Wea

lth M

gmnt

Pers

onal

Sa

ving

sLe

ndin

gCa

pita

l Ra

isin

g

Source: based on illustration ‘Financial Services Value Chain Next Gen’ by Doug Nelson; Capgemini Consulting

Paym

ents

Independent, digital front ends API-driven middle- and back office

Electrification of market infrastructure

Independent , digital front ends and middle- and back office

The value chain will change radically

Risk of losing customer relationship

2000 2018

Delivery of Parcels

Dutch postaldelivery

liberalization

Software

Microsoft disconnects

Internet Explorer from Windows

Energy

Decouplingdistribution fromnetwork support

Telecom

Net-neutralityon 4G networks

Banking

PSD2 implementation

2001 2004 2013

Bank of the future

The futureis not aboutbanking…

It’s aboutconnecting

people.

The ambition of Rabobank

Become the #1innovative bankinconnecting people.

Create new income streams

SupportInnovations

Partner forclients &

stakeholders

Increase innovation

DNA

Clear ambitions towards clients and

stakeholders

Business lending in the Netherlands

Lending Enterpises market development

The demand for credit is expected to rise through improving economy; Challenge is to serve the customer with shrinking balance question

Changing regulationsChanging Customer behaviorPressure on the traditional

revenue model

Finance additional challenges in the business playing field in the Netherlands

Required data and regulations

standards (e.g. IFRS9, A-IRB model

en Mifid)

Higher requirements of business credit portfolio quality

Economy draws to making demand for credit is expected to

rise

Rising credit demand can not be absorbed

by balance sheet

Number of business financing is going to

rise, share bank credit drops

3%

2%

1%

0%

-1%’20’17’14

2010: € 407 mrd

2016: € 425 mrd

BBP Nederland (2014 – 2020)1

Bron: 1CBS en CPB verkenning 2018-2021, 2DNB

bancair

bancair

Between High Tech and Human Touch

15

Lean startup learnings

Pega workflow strategy

Continuous Improvement

Agile implementation

Technically everything is possible …… but how does it connect to the customer and employee experience?

Outcome Digital Business Lending

16

Processing time 24h & 60s

Standardized credit scoring

Max 4 client documents

to 9 products

towards 11 types of collateral

Processing time 4 weeks

Expert based credit scoring

8-10 client documents

39 products

160 types of collateral

Positioning Pega at Rabobank

Business Function model Rabobank

Product management and operations

Governance Organisation SupportOrganisation

strategy

Investor relations

Sustainability policies

Audit services

Knowledge market policies

Compliance & risk policies

Value chain management

Portfolio management

Human resource management

IT development & operations

Facility management

Communication

Management reporting

Fiscal and legal support

Procurement

Risk management

Risk model management

Market risk management

Asset & liability management

Operational risk management

Customer process managementMarketing

Interaction managementIdentity

managementDialogue handling

Access management

Financial management

Consolidation and reporting

Treasury management

Financial restructuring & recovery

Compliance

Customer due diligence

Fraud & AML management

Data management

Relation managementThird party

management

Document management

Financial risk management

Service management

Transaction management

Information provisioning

Advisory service Sales

Financial accounting

Customer management

Relation interactionmanagement

Asset management

LendingNon financial

servicesFinancial markets

InsurancePaymentsAccount

administration

Pega at Rabobank

Product management and operations

Governance Organisation Support

Compliance & risk policies

IT development & operations

Risk management

Customer process management

Interaction management

Dialogue handling

Financial management

Financial restructuring & recovery

Compliance

Relation managementCustomer

management

Lending Payments

Service management

Advisory service

Advisory, Sales andService processesfor Enterprise Lending.

Architecture: CorePega 7 platform

Global Client onboardingfor wholesale customers

Architecture: Pega CLM, KYC

Service and claim processesfor Payments.

Architecture: Pega Smart Investigations

Arrear management, collections and support forcustomers in financial stress for Mortgage Lending

Architecture: PegaCollections

Track, route, issue, prioritise and report on crime cases.

Architecture: Core Pega 7 platform

Customer due diligence

Information provisioning

Sales

Banking Services and operations of Rabobank Country Banking and Rabo-Direct in Australia and New Zealand.

Architecture: Pega CRM, CSFS, KYC, Decisioning

Relation interactionmanagement

Development and operations

Architecture: Pega Designer Studio, BIX, AES

Pega at work in the Rabobank

Agile way of workingStandup24 hours

Sprint2 weeks

Every 4 weeks

PEGA COE & Delivery

Pega DesignAuthority

PEGACoE

Jura-AD Jura-MC

Architecture&DesignMon-toring

Jura-RD

Release

Jura-IL

LCM

LEGO

GenericAssets

Fuji

Innovation

SolutionArchitecture

LSA’s

BusinessArchitectureGovernance

SolutionArchitecture

BusinessArchitecture

PEGA @ Rabobank agenda 2017

23

1. Deployment Automation

2. ComponentizationContainerization

3. Pega Mobile

4. Standard Development Model for Pega@Rabo

5. Data Governance

6. Test Automation

7. Infrastructure, Cloud, HA

8. Robotics

9. Software QualityPegaSecure Coding

10. Application ServicesAPI’sPEGA

A BC

123

D

24

ComponentizationContainerization

Deployment Automation

Software QualitySecure Coding

Creating and improving the reference architecture

DevOps

Standard Model For Pega Development

Data GovernancePega Infrastructure,

Cloud & HA

Test AutomationFunctional / Technical

Pega MonitoringLogging

Application ServicesAPI

Rabobank Reference

ArchitecturePega

Need for Cloud

25

Rabobank Cloud Strategy

Business Requirements

Principles for Rabobank cloud-native software architecture, development and infrastructure

- A standard way of working for all the Pega Delivery Teams -

Our mission is to deliver scalable, modular Pega applications. We promise optimal delivery times. We are ready for the Cloud.

Cloud options for PegaApplications

DevOpsCollaboration between Software

Developers and IT operations

ComponentizationDevelop an application as a collection of small services

Continuous DeliveryMake a change ready forrelease without waiting.

Container based InfrastructureFrom traditional infrastructure to

containers. Future: ‘serverless’.

= worldwide trends in software architecture and development

BUSINESS DRIVERS

INFRASTRUCTURE DRIVERS

DELIVERY PRINCIPLES

TREND: COMPONENT ARCHITECTURE TREND: DEV & OPS = DEVOPS TEAM

TREND: FULLY AUTOMATED DELIVERIES TREND: LESS AND LESS VISIBLE INFRASTRUCTURE

Conclusions and outlook

Next steps for business lending

27

Pre Approved Lending

Artificial Intelligence Risk assessment

Automated funding from partners

Robotics to solve data/legacy issues

Adaptive Lending

2828

Thank you for your attention

28

Erik.Passchier @Rabobank.nl