The Power of ThreeHow Temenos is leveraging the best practices of the major technology platforms

• Partner Update • Capgemini On Testing • What’s New In T24

• Mortgage Market Trends • Private Wealth Management • Andreades On Temenos

• Vancity: Process-led Renewal • Profiling ABN AMRO And Banco Capital

TEMENOSNEWSIssue 24 May 2011

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We have reached an important juncture in the history of Temenos with the announcement of the new executive structure that will ensure a strong succession strategy for the company. The fi rst major change is that as of 1 July, our chairman George Koukis will move into the role of non-executive director. I am honoured to take on the mantle of chairman from our illustrious founder. To complete the picture, we are delighted to have been able to attract the skills and expertise of Guy Dubois, who will be joining us from MACH Group as our new CEO. We also look forward to welcoming him to the board of directors as of 1 July this year.

Our main feature in this issue looks at the key benefi ts that our platform strategy brings to the company. Our relationships with our technology partners have never been more important, and we now boast a powerful three-stack strategy that leverages the specifi c strengths of our partners IBM, Microsoft and Oracle.

We launched the Temenos partner programme in 2008 to enhance the service we offer to our customers and enable us to move into new markets globally. Since then, we have built up an enviable pool of expert resources that allow us to better serve all our customers. In this issue, we celebrate the very special role played by our partners in our success. Indeed, as we gather with our customers and the wider banking community in Lisbon for the Temenos Community Forum (TCF) 2011, we are explicitly recognising this role with the debut of our own partner awards ceremony.

Another cause for celebration is our latest annual upgrade to TEMENOS T24 (T24), R11, and we look at the main innovations that mark this release. There are a number of impressive enhancements that we have introduced in response to customer feedback, making T24 better than ever before.

Elsewhere in this issue, we examine mortgage trends and consider the role of origination processes in helping banks save money, streamline complex processes and ensuring compliance. In addition, we share the experiences of ABN AMRO Guernsey and Banco Capital in their implementation of T24.

I hope you enjoy this issue of Temenos News.

Andreas AndreadesCEO, Temenos

4. News New leadership structure, fi rst ARC Mobile go-live, EFG chooses Triple’A Plus, Youth research, Temenos awards.

6. Lead Story Martin Bailey talks about Temenos’ three-stack strategy.

9. Product Profi le Process-led renewal at Vancity.

10. Viewpoint Mike Head on Temenos’ partner strategy.

11. Viewpoint Capgemini’s Erik de Haas looks at the importance of testing.

12. Q & A Mark Winterburn discusses the new features in R11.

14. Workfl ow-centric Origination Overview by Koen Van den Brande.

16. Viewpoint Sarah Paulucci reviews mortgage market trends.

17. Case Study ABN AMRO Guernsey.

18. Account Aggregation Thibaut Jacquet-Lagrèze analyses a growing phenomenon.

19. Case Study Banco Capital.

20. Changing Of The Guard Andreas Andreades on what’s next for Temenos.

22. Innovating For Differentiation Mark Gunning considers what makes a successful bank.

Welcome Issue 24 May 2011

In This Issue:

4 TEMENOS NEWS

Temenos Announces Succession Plans

Temenos has announced its CEO and chairman succession plans. Effective from 1 July 2011, George Koukis, current chairman and founder of Temenos, will take

on the role of non-executive director, while Andreas Andreades, currently chief executive officer (CEO) will step into the role of chairman. Guy Dubois, joining from MACH Group, will become the company’s new CEO. Subject to shareholder approval, Guy Dubois will also join the board of directors as of 1 July 2011.

The new CEO, Guy Dubois, brings significant experience to the role, much of it gained in the software industry. Since 2009, Dubois has served as president and CEO of MACH Group, a leading provider of hub-based mobile communications exchange solutions. Before joining MACH, he was the executive vice president and president of product business at Amdocs, responsible for global product strategy and direction, sales and marketing, customer service and professional services.

The Temenos board unanimously backed Dubois’ appointment from among the more than 30 candidates considered, based on his strong execution skills, ability to lead top performing teams, wealth of software industry expertise and consistent achievement of outstanding results in all assignments undertaken.

Andreades commented: “I am delighted

to welcome Guy to the team, as I firmly believe he has the right skill sets, experience and fit with the Temenos culture to take the company to the next level. After 12 years at Temenos and eight years as CEO, I am looking forward to working with the team to continue to achieve outstanding results for all stakeholders. Temenos is uniquely placed and has a tremendous market opportunity both in the short and long term. As chairman, I will ensure a smooth succession and continue to contribute with my vision and passion to see Temenos

established as the leader in banking software for years to come.”

Dubois remarked: “Temenos is the market leading core banking software company. It has outstanding people, a large and enviable customer base, a state of the art product and a track record which makes it the most exciting application software business in the world today. It is a great honour to join its leadership team and have the opportunity to build on its success. I look forward to working with the board and the management team to continue to grow the company and cement its leadership in the long term.”

Several recent partner agreements will see Temenos strengthen its market presence. Temenos and Wipro Technologies, the global information technology, consulting and outsourcing business of Wipro Limited, are to jointly deliver a core banking Application Service Provider (ASP) service to European banks, featuring a new variable pricing model that will cater to a rapidly growing segment of the market. Under this agreement, Wipro will provide banks with a solution based on T24, accessed online and charged based on a ‘per use’ or monthly fee.

The service will meet growing demand for an ASP offering to suit small and medium sized banks and new market entrants. It will allow banks to bundle the licence, maintenance, services and infrastructure costs of a banking application into a predictable monthly fee and generate significant economies of scale.

In an agreement that will boos Temenos’ American presence, Temenos and partner

SOFGEN Holdings Limited are to extend the geographic reach of their alliance. SOFGEN, an international provider of IT solutions for banks and already a Temenos partner in the Asia Pacific and EMEA regions, will become a regional partner in the Americas.

Greg Green, President, Temenos Americas, said: “We have had a long-standing relationship with SOFGEN, which has complemented its existing business in Latin and North America by the appointment of additional Spanish-speaking consultants and salespeople in the region.” SOFGEN Chairman, Alex Dembitz, commented: “This agreement gives further substance to our mission to partner with Temenos worldwide and will provides Globus and T24 users with advice, guidance and engineering during the entire core-banking system lifecycle.”

Further Temenos expansion into European markets is underway following a partnership agreement signed between Temenos and IT solutions and services provider GFT Group. The agreement will help build the sales,

service and delivery capabilities of Temenos’ solutions within Europe, focusing on Spain, Portugal, the UK and Germany.

Under the terms of the agreement, GFT will provide project management and integration and testing services for T24, ARC Internet and Temenos’ new mobile banking solution, ARC Mobile.

“The partnership with Temenos is a significant step in a strategic growth area for GFT. More and more of our clients are asking for package implementation services on top of bespoke development work,” commented: Carlos Eres, Managing Director of GFT Spain. Mike Head, Global Alliances Director, Temenos, added, “GFT’s sound delivery experience across Europe adds a significant strand to our partner program, which will enable us to offer our clients in this region superior business management and project delivery skills in both core systems and front office application delivery, as well as develop new sales opportunities for Temenos.”

Newly appointed Temenos CEO, Guy Dubois

“ Temenos is the market leading core banking software company. It has outstanding people, a large and enviable customer base, a state of the art product and a track record which makes it the most exciting application software business in the world today”

Temenos Continues To Bolster Partner Network

TEMENOS NEWS 5

Triple’A Plus For EFG

Temenos On TopTemenos has garnered a clutch of awards and commendations from various quarters in recent weeks.

At the Financial Sector Technology awards 2011 in London on 31 March, Temenos took several awards, most notably Technology Provider of the Year, ahead of entries from competitors such as Logica, BT Group and Wolters Kluwer. Temenos and customer Metro Bank jointly picked up the award for Best Use of IT in Retail Banking over submissions from Barclaycard, Deutsche Bank and RBS.

For the fourth consecutive year, T24 has won the title International Best Selling Core Banking solution in the IBS Intelligence 2010 Sales League Table. Temenos has maintained one of the top two positions for over a decade.

Martin Whybrow, editor of International Banking Systems Journal, commented: “Temenos had another strong year in most geographies, securing high end deals and gaining traction notably in Western Europe, as well as demonstrating successful cross selling into its acquired client base. T24’s functional scope and international penetration appeals to a wide spectrum of banks looking to address these requirements.”

Forrester Research has named Temenos a ‘Global Power Seller’ in its March 2011 report, Global Banking Platform Deals 2010. The survey assessed 23 banking platforms, covering functionality and number of new customers. Temenos was ranked the leading global power seller, with 46 new win deals signed last year across at least six regions, the most of any vendor featured in the report. Forrester has listed Temenos as a global power seller since the report’s launch in 2006.

A leading analyst report for international retail core systems has shortlisted Temenos in its influential guide. Ovum has recommended T24 in its Solution Guide to International Retail Core Systems report. Ovum evaluated a pool of banking technology vendors based on an analysis of market impact, strength of product functionality and technology capability. The report describes T24 as “a technology platform with high deployability, with business functionality that offers breadth, good adaptability and wide market coverage”. It rates Temenos as the leading vendor by aggregate score across the three primary evaluation criteria of market impact, core systems functionality and technology assessment, as well as the vendor with the highest overall score. “Temenos has consistently increased its installed base in recent years (even during the financial crisis), to establish itself as a market leader with a strong presence across all regions,” said the author of the report, Daniel Mayo.

Integrated Channel Strategy For Youth Market

ARC Mobile Provides Differentiation For uniBank

A second Temenos client has gone live with the integrated wealth management platform Triple’A Plus. Eurobank EFG Private Bank Luxembourg S.A. (EFG) implemented the portfolio management platform following Temenos’ acquisition of Odyssey Financial Technologies in October 2010. The project, which was completed in six months, included the implementation of client data management, portfolio management, modelling and monitoring, performance analysis and advanced client reporting.

After Commerzbank Luxembourg, EFG is now Temenos’ second client to have implemented Triple’A Plus as its private banking front office solution alongside Temenos’ core banking software.

Jean-Michel Hilsenkopf, Managing Director, Temenos Private Wealth Management, commented: “T24 with Triple’A Plus provides an integrated front-to-back solution for both T24 and Triple’A Plus clients looking for a single vendor solution, with the associated benefits of an enlarged product set, centralised support and a common vision for the wealth management market. The success of the EFG project demonstrates our proven capacity to deliver Triple’A Plus on top of T24 in a short timeframe. A Triple’A/T24 interface allows our existing T24 customers to harness the powerful combination of Triple’A Plus and T24 out-of-the-box within a three- to six-month implementation.”

Banks risk jeopardising future customer acquisition and retention by failing to recognise the continued importance of factors such as traditional branch networks and parental influence, a survey by Temenos has revealed. The survey was commissioned to study attitudes and behaviours relating to personal finances, payments and banking of 1,400 16-18 year olds from the UK, China and Brazil.

Whilst contemporary banking channels such as mobile are gaining traction among the youth segment, the research, conducted by Survey Shack on behalf of Temenos, found that traditional banking channels and influences are key drivers among this segment when looking at establishing a new banking relationship.

Respondents from UK and Brazil cited parental influence as the single biggest

driver behind decisions to open a bank account, with 37 per cent of Brazilian and 33 per cent of UK respondents stating that they would choose a bank because their parents banked there. All three countries rated branch location as the second biggest driver, with 28 per cent of respondents citing this as the most significant consideration.

Mark Gunning, Global Director, Banking Services, Temenos commented: “This research illustrates that banks should consider a balanced attitude to channels, using mobile and other modern channels where appropriate but not underestimating the value of traditional bricks and mortar, even when attracting the younger generation.”

The full research report can be requested at marketing@temenos.com

Ghanaian-owned universal commercial bank uniBank has become the first customer to go live with ARC Mobile, Temenos’ new solution to address the rapidly-growing mobile banking market. Since Temenos’ launch of ARC Mobile in May 2010, 12 banks have selected the application.

“ARC Mobile is a key differentiator for us, enabling us to move beyond simple SMS-based banking to be the first in Ghana to offer more sophisticated mobile channel services such as m-commerce,” said Edward Randolph-Koranteng, Head, Electronic/Multi-Channels and Transaction Banking, uniBank. “We can now deliver alerts for various types of debits and credits, together

with other notification messages, as well as providing user-friendly, interactive SMS for balance enquiries and account transfers. ARC Mobile’s end-to-end encryption enables us to offer fully secure mobile channels so customers can safely take advantage of these functions.”

Temenos’ local integration partner TextGenesys implemented the new ARC Mobile platform. CEO Jeremiah Brown-Coleman commented: “By complementing our m-commerce expertise with Temenos’ ARC Mobile platform, we have delivered a state-of-the-art solution which offers rich functionality with high security that surpasses most solutions used by banks in Ghana today.”

TEMENOS NEWS 5

Temenos Announces Succession Plans

The Power Of Three

6 TEMENOS NEWS

The way in which Temenos works with its technology partners has undergone significant change in recent years. This can be seen most clearly in the evolution of Temenos’ three-stack strategy, which is enabling the company to optimise its relationships with the key players in the industry. Temenos News spoke to Temenos’ Enterprise Technology Manager Martin Bailey, about how the strategy works in practice

Historically, Temenos followed a platform-agnostic strategy, supporting any commercial operating system, hardware, middleware or database

that customers wanted. However, following a wave of consolidation in the marketplace, including Oracle’s acquisition of Sun Microsystems and moves by some Temenos partners to reduce the range of architectures they supported, it made sense to move towards a focused alignment with strategic partners. It is in this context that the three-stack strategy evolved, allowing Temenos to focus attention and resources on the Microsoft, IBM and Oracle platforms. As part of this, Temenos has brought on HP as an infrastructure partner, operating across the three stacks.

In building the high-quality solutions that its customers expect for all three of the platforms, Temenos leveraged the knowledge gained over its years of solid working relationships with IBM, Microsoft and Oracle. The process also benefited from Temenos’ significant investment in research and development.

Leveraging Our ExpertiseThe key to the strategy’s success and the factor that has allowed it to be launched at an affordable cost, is model-driven development. The code generation that is integral to this process facilitates the creation of appropriate code for the different platforms and saves many hours of dedicated work that would otherwise be required for each. “We already had a lot of code generation in our product, which is how we’ve been able to support such a wide variety of platforms over the years,” says Bailey. “So in developing the three-stack strategy, we were very much building on what we had already achieved.” It is crucial for Temenos to be able to deliver solutions that are fully optimised for each particular platform and there is ongoing work on architecture and implementation to establish best practices. The great strength of T24 is that its functionality is identical across all three stacks, yet it is flexible enough to allow for optimisation to meet specific platform needs.

Flexible ComponentsLifecycle governance for the three-

stack strategy is linked with Temenos’ componentisation and integration strategies. Componentisation allows for the splitting of a product into separately deployable modules or components. Bailey comments: “For a large and complex bank, investment in a core banking system is a massive undertaking. If we can break that down into bite-size chunks, it becomes a much more manageable project. Many of our customers already have a sophisticated landscape of software products and don’t want to take on yet another customer database. Our approach means that they can take on individual components without having to upgrade the whole of T24.”

Security is another critical issue for customers on all platforms. Given that each of the stack partners already has very mature security solutions in place, Temenos will fully exploit the security options provided by the different stacks in a native manner that was not previously possible. “By working together with stack vendors, we can allow for the use of highly refined security resources that have already proven their worth,” says Bailey.

The reference architecture of a banking platform is a mission-critical factor in a financial institution’s ability to function in today’s demanding environment. Temenos is able to guarantee clear reference architectures in collaboration with the stack providers, jointly assuring compliance with key performance and resilience service levels.

This approach brings powerful advantages and is reflected in the implementation and training programmes that Temenos rolls out to its partners. The outcomes include shorter implementation cycles and reduced complexity. The reference architecture is structured to provide users with a view of a small, medium and large bank on each stack, along with best practices for implementing each element of the stack.

Simplifying The CloudOne of the exciting consequences of the stack strategy is the ease with which Temenos is able to support native cloud computing. The recently announced Temenos partnership with Microsoft to offer T24 on the Microsoft Windows Azure platform might seem to indicate a head start for Microsoft in this respect, but the

other partners also have substantial cloud investments to serve their customers.

Temenos is currently using Azure both internally (to reduce test and development costs) and in implementations for customers, including microfinance institutions. “There are a number of microfinance clients who were previously inaccessible to us because of two barriers: the cost of our solution and the requirement for the bank to have its own IT infrastructure,” says Bailey. “If we can remove those barriers, which Azure helps us to do, then we can grow the accessible market quite substantially and move from an initial licence fee based model to a utility pricing model. As a bank using Azure no longer has to have an IT infrastructure, we can provide our market leading solution to a much wider audience in the microfinance world.”

For all three platforms, the cloud services space brings with it regulatory issues to be resolved around the storage of data as well as security concerns regarding questions such as whether data is safe on the public cloud. How does Temenos plan to tackle these very real issues as it brings cloud capabilities to the three-stack environment? “We think concerns will lessen over time as vendors get better at protecting systems in the cloud and as regulators get used to the idea of public clouds – if we take Microsoft as an example, the many compliance procedures which underpin the Azure platform illustrate that security is a massive focus for vendors in this regard,” says Bailey, “In the long term, when the customers are ready, we will be ready.”

In order to maintain its leadership position today, it is crucial for Temenos to be able to offer a cloud strategy that fits comfortably into the three stacks and serves a wide range of customer needs. In addition to offering T24 on the Azure platform, Temenos is also engaging with both Oracle and IBM for cloud solutions.

In the private cloud arena, Temenos is working with Oracle to bring the scalable Exadata Database Machine and the secure Exalogic Elastic Cloud to market. Temenos is also working with its infrastructure partner HP on a groundbreaking project that harnesses Violin flash memory technology to achieve dramatic improvements in application efficiency. Finally, Temenos is

TEMENOS NEWS 7

8 TEMENOS NEWS

collaborating with IBM on its Power 7 private cloud appliances to leverage the potential of the IBM Dynamic Infrastructure approach.

Competency CentresTo safeguard its ability to handle the requirements of its stack partners and ensure quality for customers, Temenos has set up competency centres that play an important role in enhancing product development and delivery as part of the three-stack strategy. Established as joint ventures with IBM, Microsoft and Oracle, the centres have three main aims. The first is to document the current architecture of each stack, together with best practice implementation guidelines. The second aim is to understand the software landscape of each of the vendors. “When you considerthat each of our partners has a huge number of products, the competency centres are pivotal in making sense of those products in a Temenos context and determining the future state architecture, which is where we ultimately want to get to,” explains Bailey. “From this, we can determine priorities and a roadmap for each stack.” Finally, the competency centres act as a focal point for Temenos and its stack partners for communication about the stack strategy.

The next release of T24 (R11) will see a variety of new capabilities and features for the different stacks. “It’s been a massive year for product development in Temenos and we’ve delivered a significant amount more strategic work this year than we have done before,” remarks Bailey. “We delivered our first service-oriented architecture component – Enterprise Customer – and validated it with IBM’s Master Data Management solution, as well as with Oracle’s Application Integration Architecture. This kind of validation is important because it shows our clients that it is a ‘real’ component.”

In line with plans to enhance the transparency of its products, Temenos has published a data model for R11, which customers can produce on demand to reflect any database changes that they have made. In addition, an important new capability has been added in R11 with the introduction of Java deployment, which enables delivery of a native System z solution targeted at tier 1 banks, the majority of which run their operations on IBM System z machines.

The Best For Each PlatformIt is tempting to try to establish which of the three stacks has the most to offer Temenos and its customers, but each brings unique benefits. For Bailey, these tend to be related to the historical competitive strengths of the platforms. He highlights Microsoft’s favourable total cost of ownership and its advanced cloud offering, and identifies

Oracle’s key advantage as the ability of its Exadata and Exalogic products to deliver impressive computing power in a single chassis, as well as its historic expertise in the database area. In his opinion, IBM stands out for its long history of understanding the demanding requirements of the most advanced financial institutions, many of which maintain System z mainframes.

A big part of the three-stack strategy is its capacity to bring a range of benefits to all Temenos clients. The larger and more demanding banks will see particular gains from the strategy on the IBM platform, notes Bailey. “Since the vast majority of these clients are IBM customers, and the majority of them are running System z mainframes, this guarantees continued interest in the IBM offering.” In his view, IBM also excels in middleware, with the MQ Series setting industry standards for messaging, and he identifies the ILOG rules engine as another key IBM strength.

In addition to the individual advantages of the stacks, there are several reasons that the overall stack strategy is good for business, says Bailey. “Because we are creating packaged software for the three stacks, we are integrating with more and more of their products and that is bringing benefits to our customers. We optimise for all platforms, so they get more high-performance solutions with shorter implementation times as

well.” All of which is, of course, good for the reputation and profitability of Temenos.

The reality is that each of the three stack partners has made significant contributions to the strategy in terms of expertise and resources, and this is set to continue as demand grows for solutions on the various platforms. Another ongoing effect of the Temenos three-stack approach is to encourage healthy competition between stack vendors, as each wants their offering to be the best – surely a good sign for the long-term prospects of the strategy.

Martin Bailey Enterprise Technology Manager, Temenos

“ A big part of the three-stack strategy is its capacity to bring a range of benefits to all Temenos clients”

TEMENOS NEWS 9

Process-led Renewal

Canada’s largest credit union, Vancity, signed an agreement with Temenos in December 2010 to replace its core banking system with

T24. The move is expected to improve service capabilities and enhance the retail experience of the 65-year-old credit union’s 400,000-strong member base, spread across 59 branches and representing $14.5 billion of assets. Temenos News talked to Catherine Aczel Boivie, CEO of Inventure Solutions and SVP of Information Technology and Facility Management at Vancity, about the organisation’s decision to use a process-driven model for the implementation of T24 in its retail and commercial banking operations, aligning Vancity’s business processes with those of the new platform to generate maximum value for the business.

What are the main goals of Vancity’s banking application renewal (BAR) programme? One of the key objectives is to modernise our core banking platform and enhance the service that we deliver to our members. We want to improve our processes and controls and provide a more standard and consistent set of tools to our employees. From an organisational perspective, we are hoping for improved efficiency and reduced time to market for new products.

In seeking a core banking platform, Vancity took a process-led analysis approach – why is this?We felt that because Temenos had a good starting point in terms of documenting most of its model bank processes, it would be a way for us to start reviewing our own business processes. This was a good starting point for us to understand how T24 differed from Vancity’s processes. We were able to identify gaps in our processes and better understand how the model bank worked.

Tell us about the ‘fit analysis’ you conducted to see how T24 fits Vancity’s processes.It gave us an opportunity to develop a sound business case by giving us a very good look at the amount of change we could expect, along with better insight into the cost of the implementation, and the benefits that our organisation would derive from a new system. At the end of the fit

analysis, the final outcome was a business case that we were able to present to our board for approval.

Can you take us through how the process-led analysis was conducted? Temenos provided a management consultant who was familiar with the process map, as well as a subject matter expert who was familiar with the application functionality. Appropriate experts and technical resources from within our organisation participated in workshops reviewing the business process. Together the group walked through the process map, followed by a deep dive into the T24 system.

We identified gaps and changes to the application and to our existing process and overlaid these on top of T24’s model bank process. Whenever we had identified a gap, a cross-functional business advisory committee made decisions on process and configuration, but if anything represented a high-impact change to the organisation or members of staff, the decision was brought forward to the executive steering group of Vancity.

What are the key benefits of adopting standard T24 processes instead of customising to meet current needs? One of our key guiding principles was to minimise customisation and to adopt the core system. We are keen to leverage the investment we’ve made in partnering with Temenos, which has created a product that has global exposure and is enhanced by investment from an R&D perspective.

To do this, we are staying aligned with the Temenos system in order to ensure we get the benefits of the product roadmap.

How has this approach changed Vancity’s attitudes and behaviours – and how will things be different for members?Vancity senior management supports this project and looks on it as an opportunity to improve the way we serve our members, who will benefit from an easier, more flexible interaction. Because we’ll be able to streamline and automate certain tasks that were previously done manually, we anticipate improved efficiency and increased staff’s ability to serve our members.

What does the future hold in terms of Vancity’s overall goals for its BAR programme? The BAR program goals are to enable Vancity to make changes in how we manage our core banking business, address market and competitive pressures and at the same time enhance our value proposition to support core banking business and strategies including: the core banking system, the loans origination system and customer relationship management. We are currently setting up the project team and doing initiation and planning in preparation for kicking off the programme. This will be followed by an analysis and requirements stage to validate our findings.

INTERVIEW: CATHERINE ACZEL BOIVIE, VANCITY

Catherine Aczel Boivie CEO, Vancity

“ One of the key objectives is to modernise our core banking platform and enhance the service that we deliver to our members”

10 TEMENOS NEWS

Profiting From Partnerships

The Temenos partner programme was launched in 2008 to further enhance the service to our customers, maximise the use of partner

organisation skills and collectively expand our global reach. Since then, the partner strategy has allowed us to create a pool of knowledgeable and certified resources that give our customers unprecedented choice and access to relevant expertise. And to recognise the important role of its partners, Temenos has set up its own partner awards ceremony, which has its debut at this year’s Temenos Community Forum (TCF) 2011.

A key element of our partner strategy is our alliances with global management consultancies, which bring with them business process re-engineering and change management skills as well as overall programme management expertise. We currently have four global services partners – Capgemini, Cognizant, Deloitte and Wipro. These partners each already have a minimum of 1,500 consultants working in the banking sector and have committed to at least 250 trained and certified resources within their Temenos practices.

Our four regional partners – SOFGEN, NDC (Pakistan), Inlaks (West Africa) and GFI Informatique (Europe) – have committed 75 trained and certified resources based in their particular territories. Local services partners may cover multiple countries and provide 25 certified resources. We currently have ten local partners, with another eight in the process of coming on board.

Particularly with regard to the tier 1 and tier 2 banking markets, we want to be able to introduce more capacity in systems integrations built around areas like networking, testing and data migration interfaces. Leading systems integrator (SI)Wipro recently selected Temenos as its core platform provider of choice for its Europe-wide application service provider (ASP) model. We expect, as a result, to be able to offer vast opportunities for banks that want to open up in new countries but do not necessarily want to use their core systems to start with.

The partner programme is helping us reach customers in a variety of previously less

accessible markets and sectors. For example, we are building a partnership with iSoft Stone in China, which is an SI in its own right and has an established presence in the region. In Indonesia, we are working with Anabatic Technologies, which has established expertise in Islamic banking. In both of these cases, the relationship with a local provider makes the difference in opening up the market.

An exciting new development for Temenos is the growth of hosting, cloud computing and ASP partnerships. We are currently working with a network of Mexican microfinance institutions, which are moving their T24 operations onto the Microsoft Windows Azure cloud platform. Temenos is also involved in developing cloud partnerships on the IBM and Oracle platforms. Through these partnerships, we have the ability to lead the industry in opening the financial services market to many tens of thousands of microfinance institutions and bringing millions of their customers into the formal banking sector.

In many countries, we are engaging with organisations that specialise in local regulation or business intelligence so that we can supply specialist consulting services to our clients. All of these services are fully integrated with Temenos services and we provide the expertise, certification and training courses to our partners.

An integral part of our strategy is the creation of competency centres, where Temenos partners have put their time, effort and knowledge into supporting the Temenos services community, giving them access to the latest knowledge.

Temenos’ partner strategy is allowing us to tackle longstanding issues such as the need to empower customers to take ownership of their testing. While Temenos has been heavily engaged in testing in the past, the aim is to encourage clients to take responsibility in this area. Managed testing partners enable organisations to help their customers with aspects such as user acceptance testing (see ‘Secrets Of Testing Success’ on page 11).

Temenos’ engagement model, called Temenos Implementation Methodology (TIM), defines how we work together with

our partners. In a recent evaluation of the various software vendors in this space, Deloitte has praised Temenos as the only organisation to have such a methodology, citing it as one of the key reasons for choosing Temenos to engage with as one of its preferred core banking partners.

We encourage customers to work with certified partners only, because we can guarantee that these partners maintain the knowledge base of their consultants. This way we can de-risk our projects and maximise referenceability.

Going forward, we are in the process of establishing even stronger alignments with our technology partners Microsoft, IBM and Oracle. We are working to create new channels to market and to use the expertise these organisations have so that we can focus on being the provider of the best core banking software in the world.

VIEWPOINT: MIKE HEAD, TEMENOS

Mike Head Global Alliances Director, Temenos

“ The partner strategy has allowed us to create a pool of knowledgeable and certified resources that give our customers unprecedented choice and access to relevant expertise”

TEMENOS NEWS 11

Secrets Of Testing Success

Testing is a vital, but often little-noticed part of new system implementation. In the banking sector, and especially in the context of new core

banking solutions, where the downside risk of system failure is potentially so huge, the pressure on testing processes is perhaps more intense than in any other industry. And yet, internal IT teams are not necessarily the best equipped people to manage testing processes.

The reason for this isn’t a lack of resource of knowledge – banks are big companies and recognise the strategic importance of major IT projects, they tend to resource them properly, but core banking systems are not replaced that often – perhaps once every fifteen or twenty years – and thus it is very difficult for internal teams to gain experience in managing a large scale testing process and equally have any experience in the new solution that has been selected. Testing is a specialist role and there are not many internal IT departments that have enough supply of such specialists.

Therefore it is normal for companies to turn to their systems integrator for testing assistance. At Capgemini, for example, testing is a major group business unit – two years ago we decided to bundle our expertise into a group topline initiative. Across all sectors we have over 10,000 testers around the world, constantly sharing their knowledge and improving the speed and reliability of our testing processes. Since we are doing multiple projects each year, we do have that specialist expertise as well as the accelerators – we can leverage our customers’ experiences to provide a quicker, more reliable, repeatable service. Many clients currently prefer to write their own test cases. While superficially an attractive option, the potential problem with this approach is that the lack of specialist knowledge which often means the scripts do not go deep enough, consequently, the testing is not sufficiently thorough. This undoubtedly leads to reiterations which are time consuming, causes the project to overrun and increasing costs.

The way to make testing quicker and more efficient, while still offering a reliable indication that systems are ready to go live

is to standardise it, to build a ‘workbench’ of testing scripts and processes that can be used to manage operations. Within the financial sector, Capgemini has already built testing workbenches for the credit card and insurance domains. Core banking is for us a logical extension of that, and we are currently engaged in a project to do just that, with our partner Temenos. We aspire to taking a leading role in testing T24 implementations around the world.

The workbench is iterative, a ‘learning organisation’, if you like. It will be built up over the years by adding knowledge from one project after another, and we will continue to improve it year on year by adding new test cases, connected to Temenos’ standard model bank. The more projects we do, the more all-encompassing the workbench will become.

Testing should always be seen as a fundamental part of an IT project. It has to be taken seriously from the beginning of the project: from the moment clients start to do requirement management, they should start their testing preparation. From our perspective, the moment we have the requirements clear, we also have a lot of our test cases.

Once you update your requirements, you should also – automatically – update your test cases. That’s why we have made a clear connection between our requirements management solution and our testing tool.

It is important to realise that testing doesn’t go on forever. You define upfront what test cases are complete enough to give confidence that your solution is reliable enough. Once they are tested properly, then we can go live. But at the same time, it is important not to cut corners; that’s the benefit of a workbench approach. We estimate that the use of a workbench, compared to starting from scratch, typically saves 40 per cent of time in building test cases.

Our testing tool produces test scripts automatically. Those scripts are run offshore, which saves clients’ money. The client visits the testing facility at strategic points, but does not need to worry about it on a day to day basis. This approach takes away client pain, makes lesser demands on client

infrastructure, is less hassle, quicker, cheaper and easier.

Both Capgemini and Temenos have already invested significant resources in this partnership, and we hope to bring it to market within the next couple of months. It will, we hope, be a significant asset to both companies, and bring real value to many of our clients.

Erik de Haas is Global VP Core Banking at Capgemini FS GBU

Erik de Haas Global VP Core Banking at Capgemini FS GBU

“ Testing should always be seen as a fundamental part of an IT project. It has to be taken seriously from the beginning of the project”

VIEWPOINT: ERIK DE HAAS, GLOBAL VP CORE BANKING, CAPGEMINI FS GBU

12 TEMENOS NEWS

New Features Make R11 Best Yet

The latest annual upgrade to T24, release 11 (R11), continues our longstanding policy of releasing an enhanced version of the system each year to enable our

clients to benefi t from Temenos’ industry leading levels of committed investment in research and development. We asked Mark Winterburn, Temenos’ Group Product Director, about the functional improvements that have taken place over the last 12 months to make T24 better than ever before.

What are the main new features in R11?With R11 we make available the Java version of T24, enabling the system to operate on any standard Java application server, so clients can take advantage of the fl exibility and portability that this platform offers. We also showcase the fi rst product set of our major programme to offer T24 on a componentised basis by re-structuring the platform according to individual functional and technical components. This will enable large scale banks with established IT infrastructures to implement T24 in a progressive and phased manner for a much more manageable project and means that customers can now upgrade individual components of T24 for the fi rst time.

An example of this is the initial standalone component available in R11, which enables banks to implement an advanced customer solution separately from other T24 modules during rollouts. In addition, a series of pre-defi ned services enables other systems within the bank to access T24 customers through standard service defi nitions and allows T24 to access external customer systems.

What product enhancements can users expect to see?System-wide enhancements in R11 include the introduction of capabilities specifi cally for the Brazilian market as well as new interest methods and interest calculation features. We have also enhanced our Process Workfl ow tooling to improve its duration analytics, to allow for recursive loops and other functional upgrades.

Our support for International Financial Reporting Standards (IFRS) continues with the introduction of our IFRS Impairment application. This supports impairment of

all products within T24 as well as extensive capabilities for handling adjustments. We have also introduced a new Provisions module as an alternative to IFRS.

Enhancements to our retail products include more sophisticated implementation of ‘cooling off’ periods, more detailed statistical analysis, additional customer advice, improved support for how cash arrangements are held within customer portfolios, and automated eligibility processing. We have also introduced product bundling to the retail product set.

ARC Teller benefi ts from improvements to teller limits, stock control capabilities and fl exibility of charges. We have improved both ARC Internet Banking and ARC Mobile in a number of areas, extending support to Google Chrome and enhancing presentation for both channels.

T24 Asset Management has a new look – can you talk us through it and other related innovations?We have introduced dynamic modelling as well as additional control and usability functions such as minimum trade sizes when rebalancing. The customer alerts system introduced for retail in R10 is now available for Wealth Management, allowing private banking clients to receive alerts regarding portfolio events via any supported channel. Our MiFID support offers new pre-trade compliance checks against the customer’s risk profi le. Portfolio cash management also has new rounding features.

The major highlights in securities processing include an extensive new solution for

margin lending, featuring real-time portfolio valuations and the calculation of buying power. We have also enhanced corporate actions by adding features such as early notifi cations and enhanced customer standing instructions for actions. There is also a new bond valuation method based on effective interest rate and allocation of gains or losses.

Are there any new capabilities for corporate banking and risk management?Corporate banks will see more fl exible intra-term amendment of interest for syndicated and commercial loans, including partial interest payments. Our Corporate ARC Internet Banking product has been upgraded to improve support for issuing letters of credit.

Improvements to our treasury area include enhancements to swaps for new revaluation methods as well as accounting for swaps with negative interest rates, improved close-out for derivatives products and better valuation of forward rate agreements.

Our risk management product Insight Risk Intelligence now has increased support for the Basel II standardised approach, including claims on retail portfolios, credit conversion factors on undrawn portions of commitments, and claims on sovereign and central bank debt upgraded to attract RWA in line with the national discretion process.

How does R11 support customers moving into cloud applications?With R11, T24 can now be deployed on the Microsoft Windows Azure cloud platform. This release also launches our new Data Model utility, which exports the T24 Data Model into external tools for easy visualisation. The export includes all local tables and fi elds created by the user. In addition, various performance improvements take advantage of new facilities in our supported databases of SQL Server, Oracle and DB2.

Overall, we believe that R11 demonstrates continued evolution of T24, with the emphasis on signifi cant architectural renewal through componetisation and Java. The powerful new features of R11 are likely to be of particular interest to our larger bank customers, especially those running IBM System z.

“ The powerful new features of R11 are likely to be of particular interest to our larger bank customers, especially those running IBM System z”

INTERVIEW: MARK WINTERBURN, TEMENOS

Mark WinterburnGroup Product Director, Temenos

14 TEMENOS NEWS

There are a number of good reasons why banks focus on improving origination processes. On the one hand it is one of the most effective and

measurable ways to reduce the cost of complex processes and ensure compliance, both from a regulatory perspective and in line with performance targets set by management. On the other, it frees up customer facing staff to spend more time with customers and helps the bank keep its promises with respect to how long it takes to get things done.

In some instances the effect can be dramatic. In the UK, Metro Bank – the first new retail bank licensed by the Bank of England in the last 100 years or so – is challenging the established retail banking giants on the basis of a differentiated customer service experience.

The fact that it can systematically keep its promise of opening up a new current account with the customer leaving the ‘store’ with a debit card within 15 minutes has a lot to do with a highly effective origination process. Note the very deliberate choice of the word ‘store’ – the Metro Bank brand promises levels of customer service more traditionally associated with retailers than with banks.

The T24 model bank library of reference processes aims to make available this sort of best practice to all T24 users and prospects. In recent years the well-established T24 model bank approach to achieving rapid implementations has been complemented with a new approach to better align IT investments with business objectives. Projects now start off with a review of processes, which can be optimised to deliver improved customer service and operational efficiency, rather than focusing on functional gaps against existing systems and practices.

Origination is one of the best processes to target for improvements, as it is often

the first process the customer experiences and – depending on how closely it meets or even exceeds expectations – this first impression can have a long-term impact on the value of that new relationship.

The Temenos Management Consultancy team has honed this approach to process-centric implementations and there are a number of instances where it has been used to achieve a positive outcome for major origination projects.

For example, at Mauritius Commercial Bank, Corina Manu, Temenos’ Global Competency Lead for front office, was in charge of a project which implemented workflow-centric origination of commercial loans. Describing the project, Manu commented: “Following an initial process review by our management consultants, we proceeded to put in place a parameterised process workflow which enables us to rapidly deal with variations for secured and unsecured lending. The resulting origination process will enable the bank to adapt to changes whenever required.”

Of course, predicting an improvement in an existing process based on the adoption of a T24 model bank reference process is one thing – proving subsequently that the business objective has been achieved mandates that a mechanism is put in place to measure performance of the process on an ongoing basis.

For some processes, where the emphasis is on straight-through processing (STP), this is relatively easy to do and can be measured on the basis of the number of times a fully automated outcome is achieved.

This scenario is common in consumer finance, where financing for consumer goods such as cars or motorbikes can at times achieve STP rates of more than 90 per cent, based on reliable customer identification and credit scoring mechanisms. In other

areas, such as mortgage origination, the process is much longer and involves manual activities at a number of steps, introducing the risk of inconsistent performance and as a result, broken promises – in other words, poor customer service.

ARC Origination – the latest origination offering on T24 – addresses this challenge by using a sophisticated workflow engine at the heart of the origination process. Not only does this enable the bank to set targets for the duration of each manual step in a process and measure the actual time taken, it also introduces the concept of service level agreements (SLAs). SLAs make it possible to pro-actively monitor whether what has been promised to a customer can still be achieved and if not, at least ensure that customers can be contacted to re-set expectations or agree corrective action.

There is another reason why placing a workflow engine at the heart of an origination process is a good idea. Ideally the method of fine-tuning processes is not a one-off exercise carried out by management consultants at the start of the project. Instead, a culture of continuous improvement encourages a periodic review of what has been learned and suggestions for improvement. A configurable workflow engine then makes it possible in a short space of time and at a modest cost to make the necessary changes to the process to implement what has been learned.

From a technology perspective, what should such a workflow engine, and the origination process which it drives, be capable of delivering? ARC Origination is one of the front office ARC – ‘acquire, retain and cross-sell’ – modules, for good reason. One of the most important technology challenges is to ensure that the workflow engine can support an origination process which is consistent across all distribution and customer contact channels. Especially in the case of complex and long-running

Workflow-centric OriginationTemenos’ Product Director Koen Van den Brande on the key to cost-effective customer service

processes such as mortgage origination, it is highly likely that the customer will have touchpoints with the process on the internet, in the branch, in the contact centre and probably even increasingly on the mobile phone. Origination processes which have been constructed with only a single channel in mind will find it difficult to deliver this capability.

The ability to initiate a T24 Process Workflow (PW) in one channel and progress it in another demonstrates the integrated nature of the T24 platform. But for some complex processes, it may be necessary to cross the boundaries between different systems. Here, the commitment to positioning T24 as an open platform has ensured that the different T24 activities which are part of a process can not only be orchestrated by PW but can also be triggered by an external third party workflow engine.

Standards are important here and so the ability to publish T24 activities as web services greatly simplifies the participation of these activities in a process which is being orchestrated across multiple systems.

To ensure that PW processes are easy to understand and maintain, the latest release of PW in T24 R11 comes with a graphical designer and a clear commitment to classify PW processes into well-recognised patterns such as looping, which were previously not available. The designer is closely aligned with BPMN, the industry’s standard business process modelling notation.

By implementing key origination processes as model bank reference processes and using PW as its workflow engine, coupled with the new SLA mechanism to track progress against commitments made to customers, ARC Origination is set to become a key part of many existing T24 users’ investments in further enhancing operational efficiency and customer service.

“ Origination is one of the best processes to target for improvements, as it is often the first process the customer experiences”

Koen Van den Brande Product Director, Front Office, Temenos

TEMENOS NEWS 15

16 TEMENOS NEWS

The economic crisis has forced the implementation of tougher lending policies around the world, a situation that is highly evident in the UK mortgage

market and replicated at different levels in a vast number of geographies.

In the UK, house prices dropped and individuals with large loan to value mortgages were trapped in negative equity, many falling into arrears and facing repossession. In addition, the Financial Services Authority (FSA) has been plagued with related complaints, over 50,000 in 2010, more than double the 2009 total. In short, albeit too late for many consumers, the crisis exposed issues with lending criteria and assessment in the entire UK market, which forced lenders to adopt a number of reforms.

In response to this, the FSA commissioned the Mortgage Market Review (MMR) to set out regulatory reform of the market. The initial paper suggests some radical changes in policy, and statistics from the FSA show that if the recommended regulations had been applied to property loans provided, then during the crisis more than 17,000 repossessions and £20 million of additional charges might have been avoided.

There is also uncertainty as to the consequences of the recently published draft European mortgage lending directive, which could create issues for lenders. For example, further investment will be required to create European standardised information sheets to show all the selected mortgage details, costs and charges in place of the currently compulsory ‘Key Facts’ illustrations.

This of course is extremely positive for many consumers, but what about the lenders themselves? And what about the consumers who do not match the criteria, or are left with home loans they cannot reduce or move to alternative solutions under the new guidelines?

The impact on lenders is twofold. Implementing the more stringent policies is costly and time consuming. It involves changes to IT systems and additional staff training. This is coupled with the decline in overall mortgage lending and the subsequent drop in profits from the mortgage lending business. The market conditions have also

created stagnancy in terms of product innovation, with a majority of lenders sticking to basic lower risk products and associated services due to both market uncertainty and infrastructure restrictions.

The drop in profits from mortgage lending means lenders need to reduce associated processing and administration costs. Many institutions are using disparate IT systems that are costly to maintain and involve a high level of customisation and coding to implement regulatory changes. These systems also restrict the ability to launch new products and in some cases, even lead to withdrawal of certain product types or services due to inability to support the new processes. For instance, some lenders are choosing to only support non-advised mortgages, further restricting their market.

The compliance elements of a mortgage process, for example those around affordability checking, do not necessarily need to take away the institution’s option to maximise straight through processing ability – the restrictions here are instead caused by the IT infrastructure itself. Many institutions suffer complexities driven by the need to use various different systems to complete the detailed mortgage process.

There is also another area to consider. Many UK lenders obtain a large amount of business though intermediary channels, in fact

according to the FSA, in the second quarter of 2010 intermediaries still accounted for 50 per cent of all mortgage sales. However, this is often a time-consuming process, with many institutions unable to accept even the application from the broker electronically, and brokers unable to provide key fact illustrations, or even quotations, on the spot. As well as this, if regulation from the MMR is applied, broker instigated deals could be targeted, making the lender responsible for validating affordability checks and proving their understanding of the reasons behind the recommendation of specific products.

The conclusion seems to be clear. Whatever direction the new compliance regulations take, their eventuality in some form is undeniable and any institution participating in mortgage lending must therefore invest in technology to improve process efficiency and enable adherence to new compliance regulations.

The good news for forward thinking lenders is that the lack of product innovation within today’s market provides opportunity to those banks willing to be creative and take some form of risk again, providing of course they have the supporting infrastructure in place. Individuals trapped in interest-only mortgages with no repayment vehicle need a way out. Some consumers are tied to loans with unattractive rates simply because of the loan to value ratio. The first lender to offer a solution to these consumers is sure to be able to choose the lowest risk clients and achieve the highest returns.

Sarah Paulucci is Manager for Strategic Plannning at Temenos

Which Way For Mortgages?VIEWPOINT: SARAH PAULUCCI, MANAGER, STRATEGIC PLANNING, TEMENOS

“ Any institution participating in mortgage lending must invest in technology to improve process efficiency and enable adherence to new compliance regulations”

Sarah Paulucci Manager, Strategic Planning, Temenos

TEMENOS NEWS 17

ABN AMRO’s Business-winning System

ABN AMRO (Guernsey) Limited and ABN AMRO Asset Management (Guernsey) Limited have been based in Guernsey for more than

30 years and their new identity follows the integration of the ABN AMRO and MeesPierson banking groups, owned by the Dutch government since 2008. The Guernsey entities provide an extensive range of banking and investment services to high net worth individuals and financial intermediaries, including fund managers, asset managers and trust companies.

The bank has been voted the No.1 Private Bank in Guernsey for clients between €1m and €10m in the Euromoney 2011 Private Banking Survey. “We are primarily focussed on providing a quality service to our clients,” says Paul Martin, Chief Administration Officer and Board Director. Martin detects optimism in the market place and he predicts success for this strategy.

ABN AMRO Guernsey has used T24 as its core banking system since February 2003. A systems hub, supported from Guernsey by a 12 strong IT team, was created ahead of the Curaçao office going live on T24 in July 2007.

A big challenge for the bank has been to identify and measure the different factors that affect client profitability, together with the associated asset flows. For example, is the change in an asset’s value due to a move in the market or due to a fluctuation in the currency in which the asset is held?

“Business intelligence (BI) is a way for us to quickly and efficiently analyse profitability for both individuals and groups of clients, to know exactly what assets we have under management and understand our assets under management (AUM) inflows and outflows,” explains Martin.

ABN AMRO began working with Temenos in the summer of 2009 to implement Insight, Temenos’ business intelligence suite, sending off sample data, reconciling the general ledger and profit and loss accounts and carrying out initial training.

The IT team sees its role as helping the business to take ownership of the new BI platform. Martin explains: “The bank’s

management team was heavily involved in the selection of Insight and from the beginning we invited as many colleagues as possible to see the demos and to get their buy-in so that the project was theirs from the start.”

In early 2010 the team conducted a series of workshops with directors and managers in both Guernsey and Curaçao to demonstrate Insight. Although only four months of data was available at this point, the workshops were very well received by everybody, with positive comments about the system’s ease of use.

“It’s about business awareness,” adds Martin. “We are now able to ensure that we work with the right customers at profitable levels.” He adds that the information from Insight has credibility and so is truly useful when making a business case. “In some cases, Insight has reinforced what we always thought, in others it has thrown up things we were not aware of.”

Board members from head office have been complimentary about the quality of information that can now be presented at board meetings, comparing it favourably with some of the bigger offices in the organisation.

“The overall cost was very competitive for something so complex. There were no cost overruns on implementation and the value

is becoming apparent in that everyone can do a more effective job. It’s more automated with no risk of manual errors,” says Martin.

Katie Wallen, Manager Finance and Control, reports time savings when preparing general ledger reports for head office and regulators, particularly at month end. Preparing the monthly report for the Guernsey Financial Services Commission used to take 1-1.5 days but now takes one hour to run and one hour to check. Users can map detail in the general ledger to the detail required by a regulator.

Insight is providing value as it spreads through the bank and more colleagues take ownership. Client relationship officers, for example, use the system when performing client reviews. The profitability part of the review is difficult and Insight makes it much more meaningful.

Looking ahead to future plans for Insight, a fourth phase is already underway to enable the bank to utilise other parts of Insight, including the automated distribution of reports by email. “The ability to produce dashboards using the Publisher module really excites us, with increased regulation, including Basel II and III, we will be able to create daily dashboards to show key indicators such as capital adequacy ratios,” says Martin.

CASE STUDY: ABN AMRO

ABN AMRO has had a presence in Guernsey for over three decades

18 TEMENOS NEWS

The Account Aggregation Advantage

The North American wealth management market is highly fragmented, with most private investors holding relationships with multiple wealth

management fi rms, including banks, brokerages and independent investment advisors.

Account aggregation services are a popular method of consolidating customer account information into a single location. There is a greater need for account aggregation services in the United States than in other markets because of the much larger number of fi nancial institutions in the region that hold investor assets.

Wealth managers in the US have been able to develop this service thanks to a lower level of regulation and fewer restrictions on data sharing with third parties. However, with the growth of the independent fi nancial advisor market in Europe, account aggregation is likely to become more prolifi c in this region.

In the US, investors’ assets are held by a variety of custodians. Private investors from the mass affl uent market (100k USD to 1m USD) to the lower end of the high net worth individual market (1m-5m USD) have parts of their assets in contribution pension plans, which are held by the plan provider used by the client’s employer.

Many private investors seek long-term investment and fi nancial planning advice to help them make sound investment decisions to achieve their fi nancial goals, encompassing personal and family fi nances, as well as business partnerships or estate planning. Increasingly, investors are using registered independent advisors (RIAs) to manage their assets held by multiple custodians, leading to an increased need for account aggregation.

RIAs and brokers often use a custodian or clearing broker to hold individual securities for a client while encouraging the client to invest directly in mutual funds or separately managed accounts (SMA). When an investor has assets held in different custodians and funds, multiple statements are generated by the various data sources.

There is a need for a consolidated view on assets as well as a detailed performance

report on aggregated assets. Account aggregation allows all the detailed client assets to be consolidated in one system. It is then possible to analyse aggregated data, compute performance, analyse the exposure and evaluate the risk of the investments across multiple accounts. Financial advisors can provide a fi nancial planning advice service using up-to-date and detailed insight of investors’ assets and liabilities, understanding the type of underlying assets and associated risk.

Today, wealth managers require an advanced solution for account aggregation and client reporting consolidation which can integrate seamlessly with external systems using sophisticated middleware. Temenos’ WealthManager™ platform is used by leading private banks to maintain a vast spectrum of client account information including transactions, cost, positions and performance history to provide portfolio management capabilities on account aggregation, including on off-book accounts. For example, using WealthManager, banks can value accounts and portfolios at any date, analyse exposure, including product look-through, process transactions (with corporate actions), and calculate cash fl ow projections, income streams and maturity schedules.

WealthManager gives a client-centric view of aggregated data and calculates market values and performance fi gures at any level (account, portfolio and client). The valuation and roll-up engines provide market values and performance fi gures for each individual constituent account and the aggregated portfolio. Portfolios are fl exibly defi ned to group accounts from individuals or several individuals (for example, a family) and allow the client advisor to perform an aggregated analysis of the portfolio.

These portfolio management capabilities applied to accounts aggregated from different sources offer client advisors the opportunity to deliver unique investment advice to their customers. They can give their clients a 360-degree view of all their investible assets with deep insight on how their investments are performing.

The fl exibility of WealthManager enables off-book accounts (not held by the back-offi ce of the fi nancial institution or custodians) to be added to the system to

give a more complete view of the investor’s overall investable assets. RIAs and fi nancial advisors can deliver complete fi nancial statement and performance reporting and also give a more thorough investment proposal advice, showing the complete trading list proposal and the impact on all their investment accounts.

It is also possible to track any type of assets and liabilities in order to give a global picture of the client’s fi nancial situation. This information can be reused and updated as the fi nancial plan matures, improving the quality of the advice and the productivity of the fi nancial advisors. It also helps fi nancial advisors identify cross-selling opportunities and fi nd new sources of assets; increasing their assets under management.

It is clear that for wealth managers, the ability to consolidate multiple data for detailed investment activity is becoming a vital requirement in delivering superior, value added client services. Account aggregation in the wealth management market provides a competitive advantage to wealth managers with advanced performance and risk reporting on investors’ consolidated assets, enabling best-in-class investment advice.

Thibaut Jacquet-Lagrèze is a Product Marketing Director at Temenos

“ Account aggregation allows detailed client assets to be consolidated in one system. It is then possible to compute performance, analyse the exposure and evaluate the risk of the investments across multiple accounts”

VIEWPOINT: THIBAUT JACQUET-LAGRÈZE, PRODUCT MARKETING DIRECTOR, TEMENOS

Thibaut Jacquet-LagrèzeProduct Marketing Director, Temenos

risk of the investments across multiple

TEMENOS NEWS 19

Stimulate And Manage Rapid Growth

Banco Capital S.A. began life in 1993 as Corfinsa Sociedad Financiera and has been serving its customers in Ecuador as Banco Capital since 2007.

It is part of the Hidrobo Estrada group of companies which have interests in construction, energy, the automotive industry and real estate.

It offers personal and business banking, current and savings accounts and financial investment services, loans and mortgages. It has retained a strong specialisation in automotive finance and commercial vehicle leasing.

The bank values its reputation for providing outstanding service, on a one-to-one basis to meet each customer’s specific needs, and any technology implementation has to enhance this unique selling point. It has worked with Temenos since 2003, initially installing Emerge (now T24 for Microfinance and Community Banking). It has since upgraded to T24 core banking, a move described by the bank as “a cutting-edge investment to support sustainable growth of the institution over a long period.”

Banco Capital carried out a rigorous selection process when identifying a new core banking solution, inviting several suppliers to take part. In the evaluation and analysis of different bids, the directors were impressed by Temenos’ commitment to banking standards and how the solution matched the bank’s development plans.

Banco Capital has more than US$85 million in assets. Overall income in 2009 was US$9 million with a net profit of US$1.16 million. The bank has more than 10,000 customers served by seven offices located in four cities (Quito, Guayaquil, Ibarra and Otavalo). Customers can access the bank’s services 365 days a year through the branch and agency network and an additional network of 63 national Servipagos offices. Customers can also use the ATM network of Banco del Pacifico – thanks to a strategic banking alliance – which provides access to the Bancomatico, Banred, Nexo, Cirrus and Maestro networks both nationally and internationally.

The May 2010 special edition of Ekos magazine Ranking Sistema Financiero assessed Banco Capital as the highest performing

small bank in the country in terms of profitability, efficiency and low arrears. The bank emphasises its efficiency, prudence and compliance with solvency rules.

The bank needs to be able to easily maintain compliance with Ecuador’s particular banking regulations and tax regime. To achieve this, the IT department uses T24’s built-in internal controls and has also added to T24 with some local development. The flexible architecture of T24 allows this without compromising core banking performance.

Another of the bank’s challenges is to provide completely automated, quick and efficient national and international banking, with products that allow its customers to make arrangements online, from their home or workplace.

Banco Capital is using T24 modules to administer customers’ accounts, new credit contracts, account opening, payments and transfers. The bank appreciates T24’s structure and the fact that it registers every change that has been made. When it comes to audit trails and traces, the bank describes T24 as an optimal system. The bank has also gained business advantage from using the various reports to analyse both historical and current data.

Banco Capital credits T24 with successfully supporting the bank’s existing products, allowing the introduction of new products and customer-friendly services and contributing to internal control efficiency.

The bank cites one of T24’s advantages as allowing the upload of massive tables, such as savings accounts, customers and loans, which has upgraded the bank’s transactional efficiency. For example, it enables instantaneous information upload for customers’ payroll management, without manual data entry. The bank’s IT team has been fully engaged in T24 customisations so – while business growth and the associated increase in the size of its customer database has impacted hardware, license, maintenance and technical support costs – staff numbers have remained the same since deployment. Banco Capital sees the T24 solution as the basis for future developments and next in line is implementation of a cash management system. Also on the horizon are version 8.0 and 9.0 upgrades. The bank seeks to continue its growth by providing new features and services to customers and it will exploit T24’s capabilities by implementing or upgrading modules that enable these customer-oriented innovations.

CASE STUDY: BANCO CAPITAL

Banco Capital’s upgrade to T24 core banking will enable sustainable growth

20 TEMENOS NEWS

Changing Of The Guard

Although he is preparing to hand over the chief executive’s seat at Temenos after eight years, moving into a new role as chairman of the company’s board of directors, Andreas Andreades retains his enthusiasm for the company’s future prospects.

“The last eight years have seen a dramatic change in our business,” he says. “We have grown about sixfold since 2003, up from about US$100 million in revenues to around US$600 million this year. We’ve increased our market share dramatically, and we have evolved into a much more complete solution provider to the banks who are our customers. But there is plenty more for us to do.”

The period since 2003, as Andreades points out, divides itself naturally into two four year segments – the boom years, running up to the emergence, in 2007, of the credit crisis, and the downturn since. He is proud, though, that the very different business environment that has gripped the financial sector in the last few years, hasn’t derailed Temenos’ development.

“Before 2007, CIOs and IT departments often had a free hand to run projects,” he says. “Generally, they had the authority to buy into multi-year, large scale commitments. In the last few years, that has changed. There is much more scrutiny, and a much closer focus on return on investment. The banks are more selective. But this isn’t necessarily bad news, if you are confident and buttoned down in terms of your value proposition. Yes, there has been vendor consolidation – but the strong have survived, and I am pleased that Temenos is counted among the strong.”

Andreades says the rapid growth Temenos experienced during the early part of his stewardship was key to its continuing to prosper when times became tougher. “Critical mass and scale are important in more challenging markets,” he says. “We’ve been fortunate to have grown fast enough to attain that critical mass and it’s a big ally. Our industry is going through a maturing process – the early starters have grown up and are maturing the core banking business. Now, vendors that want to remain successful have to demonstrate the ability to work step by step with the banks and deliver real business benefits. They have to be able to walk the bank through the replacement process so banks can manage the risk associated with such projects. They need to have mature partnerships with leading systems integrators and technology partners. Our Microsoft strategy is a good example of this: last year, it enabled us to open up core banking solutions on a technology available at an affordable cost.”

As he moves into his new role as chairman, Andreades sees plenty of opportunities for Temenos to continue its growth. New CEO Guy Dubois, he says, brings great strengths, notably experience of running

large organisations, as the company has now become. “Our stated ambition is to become a billion dollar company,” says Andreades. “I first met Guy more than six months ago, and, during that time, we’ve had extensive discussions about how to reach our goals. Obviously a new CEO brings new ideas and challenges strategic assumptions, but I don’t expect that will result in a strategic repositioning of the business. We agree with Guy on the broad strategic positioning – partners, M&A activity, growth in key target markets. It’s business as usual.”

But ‘business as usual’, in a market as complex and fast-moving as the banking sector, is always subject to change. “We need to develop our partner model further,” Andreades reckons. “Last year, partners gave us around five per cent of our revenue, we should be doubling that in 2011. There are critical growth initiatives around solution areas like business intelligence and compliance, front office, which are also critical. Geographically, there are very large markets where we are still very small, and we expect to target those markets through organic efforts, and possibly also M&A activity. But there is no silver bullet that will get us to the billion dollar figure. Rather, it will be lots of targeted initiatives, in a very similar way to how we got where we are now.”

Although the last four years have been tough for the financial sector, and thus also for those who supply it, Andreades says the changes in the industry bring opportunities too. Banks are facing new regulatory issues such as the need to hold more capital, and need to become significantly more efficient and customer focused if they are to succeed. “The financial crisis has created a landscape that will dramatically change over the next 10-15 years,” he explains. “There will be clear winners and losers. Those that manage service, efficiency and product innovation will do well; those that don’t, won’t. Banks have to fix the way they interact with their clients. We see very fragmented, very monolithic customer service from banks that are tied to legacy technology. Their clients will challenge the banks to deliver better service, or otherwise they will find alternatives – maybe through the supermarkets? Their customer service proposition is the way for banks to move away from competition based solely on price. Today, banks are mostly just saying ‘here’s a cheaper mortgage’ and people switch. We believe people will pay a higher price for better service.”

“Internal efficiency is the other central issue for the banks,” he goes on. “Today, banks spend an average of 14 per cent of their revenues on IT, compared to about six per cent in other industries like FMCG or pharmaceuticals. These eight points of higher spending aren’t necessarily giving them an advantage – actually, it is the cost of maintaining legacy systems. As regulations get tougher, banks will have to put more money aside to cover risks and satisfy the public demand for safer banks. So the only way to maintain profitability is to become more efficient.”

“ The financial crisis has created a landscape that will dramatically change over the next 10-15 years. There will be clear winners and losers. Those that manage service, efficiency and product innovation will do well; those that don’t, won’t”

Modernising legacy systems is, Andreades believes, a massive challenge for the banking sector. There are, after all, very good reasons why legacy systems have endured, even if they are expensive to maintain: they work, replacement is a massive and risky process, and banks, especially after the last few years, have an understandably cautious view on risk. So Temenos has a solution for these companies. “At TCF, our user forum, this year, we will be announcing the launch of our System z mainframe release of T24,” Andreades explains. “What we are achieving by this is to bring T24 – already the best selling package in banking – to those banks that are using and are comfortable sticking with mainframe technology, without having to change their entire infrastructure. Most of these are the largest banks in the world, and by offering T24 in a componentised format, we are offering the chance to adopt new technology without having to do a big bang changeover.”

As Andreas Andreades steps into his new role, he looks back to his eight years running Temenos with pride, but also surveys the future with a degree of confidence. What, we ask him, might the company look like a few years further down the line?

“Our goal is to reach the US$1 billion mark in the next two to three years,” he says. “If we do that, there is still plenty of potential for the company to grow in the global banking sector. Looking five years out, we should be extending our footprint within clients – into areas like payments, for example. In mobile banking, we are only just getting started, and it is a huge area that can be very disruptive for banks. So I foresee Temenos being a bigger global player, with a deeper footprint, but fundamentally doing what we do now.”

TEMENOS NEWS 21

Andreas Andreades CEO, Temenos

22 TEMENOS NEWS

Innovating For Differentiation

The qualities that define a successful retail bank are constantly changing as banks respond to challenges from many quarters. Competitiveness in the retail banking market is not a new phenomenon, as the major banks are accustomed to finding their margins continually

squeezed in the battle for leadership in the market. However, new hurdles are appearing in the retail landscape as new entrants, who are often more agile, target the traditional lines of business on which the established banks have always been able to depend.

In such a volatile and rapidly changing market, the major players need to address these developments if they are to maintain their dominant positions without a gradual loss of market share. Faced with these realities, banks need to be able not only to adapt to these volatile market conditions but also commit resources to meaningful differentiation strategies. Innovation is the key to realising positive differentiation, but the real challenge for banks is managing that innovation at a competitive price.

True innovation can be a costly business and comes with an element of risk. It requires a willingness to devote resources to testing ideas in the marketplace with the knowledge that not every idea is necessarily a good one. Many banks would prefer not to be exposed to the level of perceived risk that accompanies the status of innovators in a tough and unforgiving environment. The question that then arises is whether banks can take steps to effectively de-risk innovation.

One of the key risk factors associated with innovation is the time lapse between concept and realisation. So if banks can find a way to reduce the overall time spent on innovation, they can create new products and channels in real time, thus mitigating many of the risks associated with creating services for future implementation. What better way to ensure the success of a new product or channel than to build it for a market that the bank already fully understands, a market that exists today?

Any attempt to reduce the innovation timeline depends on a good understanding of the main barriers to creating new products and banking services. Not surprisingly, technology is often seen as a major obstacle, in particular the cumbersome legacy systems that can hamper or even prevent the development of new service propositions. Retail banks are large and complex organisations and are often more dependent than other banking sectors on technology to deliver a trusted, reliable and secure service to their customers.

Core banking technology should never be a factor restricting the organic growth of a bank. Instead, it should be an enabler of innovation, allowing new services, products and channels to be created and delivered efficiently and at minimal cost.

For those that do not recognise this level of flexibility within their core banking infrastructure, now is the time to look at technology renewal. To compete in the modern retail market, banks need to be able to respond to diverse market needs without the delays and inefficiencies caused by outdated systems.

Of course, while technology is crucial to a bank’s ability to bringing cutting edge solutions to market, the characteristics of a good bank go beyond simply the products that it offers or its pricing models. The management and culture of the bank is what really drives its identity as an organisation, along with the processes it creates to deliver back office and frontline services.

For any retail bank to succeed in today’s rapidly changing market, it must be engineered to be truly responsive. A successful retail bank is defined by the extent to which it responds to the requirements and expectations of its customers – and failure to do so will ultimately lead to erosion of lines of business. Technology plays a vital role in enabling banks to be truly responsive.

At Temenos, we believe that advanced packaged core banking technology provides the foundation for business growth, from which banks can build new revenue streams and deliver enhanced frontline services. Valuable cost efficiencies can also be realised through operating a single, flexible banking system. These strategies, along with others touched on in this article, form the essential building blocks for any successful retail banking innovation and differentiation strategy in today’s turbulent banking market.

What are the hallmarks of a successful bank? Mark Gunning, Global Business Solutions Director at Temenos, looks at what sets top banks apart from the competition

“ Innovation is the key to realising positive differentiation, but the real challenge for banks is managing that innovation at a competitive price”

Mark GunningGlobal Director, Banking Solutions, Temenos

Organizations today are under tremendous pressure to implement effective cost-control strategies without sacrificing growth, productivity, functionality, or flexibility. Enterprises that currently support multiple data platforms face issues of inconsistency and higher short-term and long-term licensing and service costs.

As a database management solution, Microsoft SQL Server 2008 R2 provides everything an organization needs to lower its total-cost-of-ownership, manage all volumes of data from birth to archival, and provide mission-critical functionality and reliability. Microsoft SQL Server 2008 R2 is a complete set of enterprise-ready technologies and tools that help people derive the most value from information at the lowest total-cost-of-ownership.

Temenos and Microsoft offer core banking solutions that address today’s industry pressures, while providing the flexibility to respond to tomorrow’s challenges and opportunities. Leveraging the latest technology innovations available in the Microsoft Business Application Platform, Temenos’ and Microsoft’s approach to core banking helps financial institutions increase productivity and profitability through an improved total cost of ownership and uniform operational environment, which enhances time to market and operational efficiency.

Find out more on how to achieve optimum ROI by running Temenos Mission Critical Core Banking solutions on the Microsoft Business Applications Platform at www.todaysenterprise.com

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