Accenture Payment Services for Financial Institutions Bridging communities, enabling commerce

Accenture Payment Services for Financial Institutions Bridging communities, enabling commerce

Welcome to Accenture Payment Services (APS). Our theme is Bridging Communities, Enabling Commerce. Payments bridge communities e.g. consumers with businesses, corporate customers with suppliers, one country with another; and Payments enable commerce, whether it is at point of sale, over the internet, mobile or by other means. Technology is changing both the way communities are connected for payments, and the way they engage in commerce. Our mission in APS is to help our Payment clients navigate this change successfully. A key challenge for Financial Institutions is to make the right choices to compete more effectively in this environment. Broadly, we distil these choices into three areas: 1. To digitally enable accounts particularly current/checking accounts, to be useable over all channels for commerce e.g. through mobile payments; or to let them become dumb accounts used simply to fund the payment accounts and innovative payment mechanisms provided by others 2. To provide channel services for corporate/business customers on top of their corporate bank and cash management accounts, to allow corporates to improve the way they manage their cash, liquidity, working capital and trade; or let these accounts be used simply as collection and disbursement accounts, with cash balances swept into the accounts of competitors offering a fuller suite of services 3.To implement a modern payment business and IT architecture, that manages the transaction processing for core checking/current and cash management accounts for domestic, international, retail, corporate, low value, high value, urgent and nonurgent payments; or outsource to a third party. Whatever the Payment choices you face, we can help you. In this document, we outline how the Payment landscape is changing, seven hot topics in it which are the top-of-mind issues for our clients, and the five core offerings we use to organise our skills and capabilities to help you address your Payment issues and requirements. My name is Massimo Proverbio, I am the Global Managing Director of Accenture Payment Services. I trust you will enjoy reading the following pages, and I look forward, with my teams around the world, to serving you. - Massimo Proverbio 1

The changing landscape of payments for financial institutions Across the global banking industry, rapid advances in technology are combining with profound shifts in consumer behavior to transform the payments landscape. Driven by these forces, the payments environment is growing and changing at an unprecedented pace. Simultaneously it is becoming more automated, more competitive, more innovative, more regulated, and more global. The speed and scope of change are breathtaking. Electronic payments globally have been growing at 10% to 15% for the past five years - and will continue to do so for the foreseeable future. In the US, research shows that 30% of tablet owners have used their device to shop online 1. In the UK, which accounts for around one-sixth 2 of global online commerce, we estimate PayPal handles over 25% of online retail payments, taking business away and therefore fee income from banks and card issuers. And this scale of change is replicated all over the world: for example, about 20% of Kenya s GDP passes through the M-PESA mobile payments system each year 3. 2

Rising strategic importance It s not just payments channels and processes that are being transformed, but also the strategic importance of payments as a business activity. From its origins as a utility supporting other revenue streams, payments are evolving rapidly - given the right investment, focus and management - into a key pillar of competitive advantage in its own right. As a result, banks payments operations have become a key focus at the boardlevel in the drive for value creation and differentiation. To compete effectively and sustainably in this fast-evolving environment, financial institutions and corporates from all industries have an urgent need to develop new strategies, operating models and capabilities for their payment and related transactional activities. Financial institutions that take the right steps can position their payments offerings to compete more effectively with new entrants to the payments domain, and be more relevant to consumers and corporate customers. Accomplishing these goals requires them to leverage new technologies - both to sustain the relentless growth in electronic transactions, and support the proliferating ways in which payments are initiated over digital channels. 3

across the entire value chain However, the transformation of the payments landscape - and especially the headlong migration to digital platforms - is not just relevant to banks. For example, as Figure 1 shows, digital commerce for consumers involves an end-to-end payments value chain that unites the experience of merchants and consumers, from the selection of goods to purchase, to the purchasing decision, to the payment itself, and on through to the loyalty rewards and data analysis to persuade the customer to return. It can involve a wide array of participants including not just banks but also retailers, technology companies, alternative payment providers, communications operators, and corporations selling goods and services. A number of these players are entering the value chain, and competing head-on with banks for transaction volumes and revenues. As a result, banks face a clear risk that they could be disintermediated, losing out in terms of revenue, customer relationships and market share. There is a similar payments value chain for business-to-business e-commerce transactions, enabling corporates to dramatically reduce the time and costs involved in payments. For corporates engaging in e-commerce, banks play a valuable role in managing the process efficiently and transparently while also ensuring regulatory compliance. Banks can also provide corporates with a wealth of information around the payments processes that treasurers can use to help manage their liquidity, forecasting and cash management. Figure 1. The end-to-end digital payment value chain Digital Commerce Merchant s Experience Pre-payment Payment Post-payment Targeted Ads Promo Coupons Location-based marketing Social marketing etc Search Analytics Plastic or mobile Remote or contactless Credit, debit or prepaid Account or card Loyalty (points accumulation, redemption) Customer care Add-on sales, etc Analytics Awareness Knowledge Preference Choice Repeated choice (loyalty) Word of mouth (viralization) Consumer s Experience 4

Alternative payments providers: an escalating competitive threat to financial institutions payments business A growing number of major global technology companies with powerful consumer brands - already including Google and PayPal, and soon expected to be joined by Apple - are set to target the payments arena with online and mobile wallet-based offerings. Banks cannot afford to ignore this escalating competitive threat. As usage of these offerings grows, and as more payments and value move outside the traditional banking system, the impact on banks could be pervasive, affecting their customer relationships, deposits, and - as a result - even their ability to meet capital adequacy requirements. Given that their traditional payments business model is based on charging fees for transactions, banks need to take a hard look at their own payments operations, and work out how to compete more holistically along the payments value chain. Otherwise there is a real risk of wide-scale disintermediation and lost volumes as millions of customers turn to the new lower-cost alternatives. These new entrants are characterized by converging technologies, innovative business models, and a strong focus on ease-of-use for consumers. Their value proposition includes pushing back the boundaries of usability in areas such as mobile wallets and nearfield communications (NFC), while also offering payment transactions at lowcost or even no-cost. The technology entrants can do this because, unlike the banks, they are not seeking to generate revenues solely from the central payment segment of the value chain in Figure 1. Instead, they can charge for the transaction itself by taking data rather than money - and then leverage that data to create revenues in the prepayment and post-payment stages. 5

New landscape - new skills For banks and other participants, all these changes bring an urgent need for deep payments-specific skills and insights to optimize both strategy and operations. Following the rapid emergence of payments capabilities as a competitive differentiator in the past five years, many payments functions in banks are now led by seasoned senior executives with deep experience in many areas of banking. Irrespective of whether these leaders already have specific knowledge of payments processes and technologies, they are faced with the challenge of setting and implementing a new strategy for payments in an environment where the pace of change is unprecedented and accelerating. This demands skills both within and outside the traditional payments domain, including an understanding of shifting consumer behaviors and revenue opportunities along the entire payments value chain, and knowledge of organizational design and structuring. It also demands strong governance from the top to set a payments strategy that is not only new, but holistic across the enterprise. All too often, a bank s own internal operations - card, retail banking, channels and so on - are effectively competing for the same transactions, and for investment funds. These internal conflicts create a confused, duplicative and inconsistent approach to payments innovation. To avoid such outcomes, often board-level leadership is required to drive through a holistic vision and strategy. 6

Mobile banking: large European mutual bank Client objectives This client s aims were to boost its speed to market through a robust mobile banking proposition, and create the capability for ongoing development of mobile as a strategic channel. The solution needed to deliver a high quality end-to-end customer experience, complete with ongoing development and support while maintaining the highest security standards. Accenture solution Accenture s solution enabled the client to position mobile devices as a channel in its own right for self-service banking, with the capability to integrate mobile banking across its distribution and corporate functions. Accenture recommended a packaged solution from a third-party, hosted internally. Integration was via direct access to the bank s core banking system to support the planned functionality roadmap, including payments and analytics in support of fraud management, compliance requirements and overall performance management. Business benefits The client expects a significant reduction in balance enquiries via ATM and telephone, delivering projected cost benefits over five years totaling US$13 million, against an initial investment of US$4 million and operating costs of US$3 million. The solution included an integration layer between the package and existing services layer, thus enhancing flexibility over the choice of vendor solution. 7

Today s hot topics The scale and intensity of the changes under way in the payments value chain have now turned it into a key board-level issue for all banks. Accenture s wealth of experience in helping financial services clients achieve high performance in payments has enabled us to pinpoint a set of seven hot topics that are currently dominating banks payments agendas. As Figure 2 shows, these seven topics have emerged across the three key payments domains of initiation and acceptance; inter-bank infrastructure; and end-to-end operations. Banks need to view and tackle all these topics in the context of an increasingly digital and global payments world, where the growing competitive threats are balanced by opportunities to generate new revenues and add value for clients. To seize these opportunities, banks need to examine the benefits and support they can provide to customers in emerging areas - e.g. Electronic Bill Payment and Presentment (EBPP) and Electronic Invoice Presentment and Payment (EIPP) - and to work out how they can leverage their position to support capabilities such as secure identity management and trusted transactions. Ultimately, the choice for banks is between enabling their accounts for full use over digital channels for digital commerce and corporate cash management; or allowing competitors, including new entrants, to provide those services instead. Figure 2. Seven hot topics in payments Initiation and Acceptance Inter-Bank Infrastructure Digital and Mobile Payments Corporate Payments National Payments Infrastructures Sourcing System Landscape Payments Transformation Regulation End-to-End Operations Source: Accenture analysis 8

Hot topic 1: Digital and mobile Payments are converging rapidly across channels - including point-ofsale, mobile and online - enabling new business models and new entrants into a fast-developing digital commerce ecosystem. Within this overall trend, online and mobile micropayments are emerging as a driving force that is monetizing social media and enabling new online businesses. This development is seeing virtual currency business models being used increasingly by new non-bank entrants to facilitate micropayments, drive customer engagement and encourage repeat purchases. A related growth area is payments via near-field communications, or NFC (see information panel). And interest in mobile and online bankenabled payments (MOBEP) is escalating rapidly, enabling bank account payments to be transacted via an ever wider array of channels, ranging from mobile handset to PC and from TV to POS terminal. Our deep industry involvement and understanding confirm that mass adoption of mobile financial services is edging nearer, as contactless payments, mobile payments and mobile banking gain momentum. In Accenture s view, mobile banking and mobile payments will become a central part of each consumer s Mobile Life, ranging from transport ticketing to digital identity - a development in which banks cannot afford to be relegated to the role of bit-part players. Accenture s comprehensive digital innovation capabilities can help banks succeed in the mobile payments domain, with solutions across business-toemployee (B2E), business-to-consumer (B2C), business-to-business (B2B) and machine-to-machine (M2M) capabilities. Our offerings include a mobile wallet solution covering bank/card account and stored value account management, mobile/online bank account payments, and loyalty and coupon solutions. By enabling and offering bank accountbased online payments, banks can counter the threat to their existing revenues from the new online entrants. And Accenture Payment Services has established itself as a global leader in helping banks maintain their competitive edge in digital payments. 9

Near-field communications (NFC) Payments via NFC are an increasingly important area of mobile payments. These are contactless payments made at pointof-sale using a mobile phone, and are similar to contactless card payments but with the added benefits of mobile handset capabilities. NFC is primarily an initiation method - and although the standard approach is to initiate a card payment using card details held in the mobile, other payments such as bill payments, person-to-person and bank transfers are also possible using NFC. NFC technology has been available for many years. Now growing numbers of manufacturers are starting to produce NFC-enabled phones, and major NFC payments propositions - such as Google Wallet - are being introduced. Additionally, merchants are increasingly able to accept NFC payments using the contactless POS terminals being rolled out for contactless cards. All of these developments make mass adoption of NFC for payments a very likely prospect within the next few years - and banks need to prepare for it in their payments infrastructures and processes. This means answering four key questions: 1. What does NFC mean for consumers, retailers, service providers - and banks themselves? 2. What factors will characterize and shape its emergence: rollout by region and/or product; triggers and catalysts for adoption; market growth accelerators and de-decelerators? 3. What positioning and strategy should banks adopt - franchise, value proposition, alliances, capabilities? 4. How should banks get started with NFC? Accenture s digital innovation payments team has the deep industry understanding and technical expertise needed to help any bank answer all these questions. We provide this guidance by looking beyond the current transitional phase of market activity to the long-term future, and identifying where banks can position themselves now to ride the NFC wave profitably as it gathers momentum and scale. 10

Hot topic 2: Corporate payments Today s corporate customers want more value adding services from their banks, delivered through lower cost, higher flexibility and richer connectivity. As Figure 3 shows, banks that meet these requirements can generate new revenue streams, while also enabling their corporate customers to achieve cost savings - creating a win-win for bank and client. In terms of the type of benefit the offer brings, value added services for corporates fit into three categories: Improve sales - including supplier financing, and cross-border services such as payments and collections. Reduce cost of working capital - through better cash flow forecasting and automated cash management, including multi-bank and multicurrency cash management Reduce cost of operations - including e-invoicing, automated collections and reconciliation, and analytics/ management information (MI). The Accenture Financial Supply Chain Platform enables banks to deliver and optimize all these benefits for their corporate and small and medium-sized enterprise (SME) customers by integrating the relevant bank and corporate systems. The platform is founded on a framework of 28 services, from which a bank can select a tailored offering precisely geared to the needs of its business customers. Figure 3. Impact of value added services on corporate costs Without Bank Value Added Services With Bank Value Added Services Operating Costs of Financial Operations Operating Costs of Financial Operations New bank income from Value Added Services Corporate Cost savings Bank Txn Fees Cost of Working Capital Cost of Working Capital Bank VAS Fees Reduced transaction fee Income for banks Bank Txn Fees Source: Accenture analysis 11

Hot topic 3: National payments infrastructures Clearing and settlement mechanisms (CSMs) across the world are undergoing technology upgrades, moving towards real-time payments, and expanding their services along the value chain and across geographies. In Europe, these trends are seeing the multiple legacy national-based payments infrastructures merge with each other and add more capabilities, and a trend for bilateral payments clearing to migrate to centralized, multi-lateral clearing. Meanwhile, the various payments infrastructures in the US - Fedwire, NACHA, and checks - are converging to same-day processing, a trend that is also appearing in Asia. And there are plans to upgrade a number of Clearing and Settlement Mechanism (CSM) infrastructures around the world, in both developed and developing markets. Banks need to keep pace with these changes and adapt their payments systems and processes to reap the fullest possible benefits for their customers. Accenture Payment Services can help them upgrade or replace payments systems and operations to ensure the efficiency and flexibility that will be crucial for success as infrastructures evolve. For example, we can bring clients across the world the benefits of our industry-leading work on Faster Payments in UK, all the way from defining and proving the business case, through design and testing to implementation, including value-added pricing and differentiation. 12

Hot topic 4: Sourcing Payments outsourcing provides banks with an alternative to continuous investment in internal capabilities across a wide array of payments-related processes. Various options are available within this overall landscape - ranging from full service to transaction service to hosted application service to white labelling - but the payments outsourcing landscape as a whole is still at a relatively early stage of development. Strategic sourcing decisions around payments need to take transformation and location factors fully into account. Processes which are not core competencies - such as management of direct debit instructions - can be shifted to specialised partners, who can execute them more efficiently and at lower cost. If outsourcing is the chosen approach for one or more activities, success requires well-defined transition points, facilitated by consolidated payments processes. The benefits for the bank include an improved focus on core-competencies, together with cost reductions from the external provider through economies of scale. Bank staff can also be freed-up from non-value adding work to more profitable services. Accenture s core payments team use our proven Business Operations Modeling framework to help banks devise new operating models for payments, and to guide them in their decisions over which processes to build/retain and which to outsource to a third party. This proprietary Accenture framework supports these choices by enabling banks to analyze and position their payments processes around three dimensions - sourcing, transformation, and location. 13

Hot topic 5: Payments transformation Many banks take the view that the profound changes under way in payments demand nothing short of a transformation of their internal payments infrastructure and processes. The ultimate aim of most payments transformation programs undertaken by banks is to consolidate payments operations and replatform to an architecture based on one platform, multiple payment types - a so-called payments hub. Given this aim, there is a widespread misconception that the transformation will inevitably involve a complete upfront replatforming of payments systems. In fact this does not have to be the case: many banks choose to consolidate and transform payments operations first, and then progress with systems replatforming in incremental steps over a longer timeframe. In line with this approach, an initial phase focused on capturing quick wins by standardizing processes and rationalizing products and market connectivity, is followed by a restructuring phase to consolidate operations and then replatforming of IT at the client s chosen pace. In our experience, the outcomes usually achieved include a 25% to 35% increase in productivity, 20%+ reduction in operating costs, and outbound straightthrough processing (STP) rates of over 90%, accompanied by decreases in customer investigations and headcount costs. These enhancements are delivered while simultaneously making the operation leaner and more flexible to support business requirements for better customer service, new products and revenue streams. The payments transformation programs that deliver benefits like these are driven off a clear understanding of the future target operating model for payments, which should be defined early in the project, along with a strategic IT architecture for payments. Accenture Payment Services has a strong track record in helping banking clients consolidate their payments operations at pace, and then tackle the IT aspects through a phased approach involving assisted transformation and/or carveout. In executing such projects, key aspects of our benefits delivery are our independent stance and perspective and our willingness to share risks and rewards with the client. This means we can often drive through change that would be difficult for the client to achieve internally, while keeping our respective interests and objectives fully aligned. 14

Payments transformation: Regional European bank Client objectives This client identified a clear need to transform its payments operations around the world, in order to fulfill its strategic vision as a leading transaction bank in the changing European banking landscape. Accenture solution With Accenture s help, the client separated production from distribution by placing payments processing in a shared-service center (SSC), leaving the customer-facing roles in business units in each of the countries where it operates. In the SSC, highly automated products such as credit transfers (for SEPA) were separated out and their processing standardized on to one payments platform, with rationalized gateways to clearing systems and SWIFT infrastructures. Business benefits The Accenture payments transformation solution included the deployment of lean manufacturing and continuous improvement techniques, resulting in dramatic improvements in the efficiency of manually-intensive processes such as complex international payments. The operating model also allows flexible balancing of the workload across various production locations to optimize the allocation of resources, thereby reducing costs. The net result has been a 35% productivity improvement, an increase in outbound STP (straight through processing) to over 95%, and a significant rise in customer satisfaction. 15

Hot topic 6: Systems landscape Accenture s database of bank payments installations shows that more than 60% of banks use external packages for their payments systems, and only about 20% use the same package for more than one payment type. So, while a payments hub of the type described above remains a goal for many banks, few - if any - have yet achieved it. Our research also finds that about 18% of banks use only legacy or custom systems for their core payments system needs, and that 50% use a mix of legacy and package solutions (see Figure 4). To try and address this fragmentation, some banks are replatforming their core payments systems using packaged software, with around 15% saying they intend to replatform in the near future. Accenture s Global Delivery Network (see page 26) provides an unsurpassed proven delivery capability and toolset for successful payments replatforming and application outsourcing, and a growing number of leading banks worldwide are using us to help renew their payments systems for the new landscape. In designing and implementing the right solution, we have deep experience in working with leading industry packages including Fundtech, Clear2Pay, Dovetail, ACI, and the SAP Payment Engine. Figure 4. Potential scope of strategic sourcing in payments Legacy Only 18% Legacy and Package 32% Package Only 50% Source: Accenture internal analysis 16

Hot topic 7: Regulation As new regulations affecting payments are introduced across the world, their impact is being compounded by the ongoing convergence of technology and business processes along the entire payments value chain. The question of how well each participant handles these regulatory pressures will help to determine who wins the majority of payments traffic and the related revenues in the years to come. At the same time, the entire global banking industry faces the risk that a future long-term deterioration of its deposit base, under the impact of competition from new entrants, and the advent of a rising generation of consumers who do not regard a bank account as a necessity. The resulting loss of deposits could impact the industry s position in relation to capital adequacy rules. Meanwhile, the ever-increasing burden of payments regulation is a factor in all regions. In Europe, the introduction of the Single Euro Payments Area (SEPA) in 2008 - and the recent introduction of a migration deadline of February 2014 - have forced banks to reassess their payments processes, technology infrastructures and systems, and to migrate from legacy domestic payments onto full SEPA volumes. Time is running out: adoption of SEPA credit transfers has already reached a tipping point, with monthly volumes having experienced annual growth of over 100% for several years (see Figure 5). The regulatory pressures are equally intense in other parts of the world. In the US, the Dodd-Frank Act has significant impacts on payments, and the Durbin Amendment has introduced further new rules around card transactions and fees for debit interchange transaction. Regulatory change is also impacting payments processes in Asia Pacific. For example, with online payments in China growing at 100% per year, the People s Bank of China (PBoC) issued new regulations in 2010 favoring bigger, more secure third-party online payments networks. Again, banks are having to review and amend their payments processes to comply. Some regulations introduced in one part of the world, such as FATCA in the US, have implications for payment operations globally. At the same time, the industry faces major challenges from the inconsistency of regulation between different national and regional structures. This fragmentation effectively acts as a tax that impairs efficiency in global financial institutions and corporations. To the extent possible, some form of harmonization is urgently needed to reduce the costs that this inconsistency imposes on global business. Payments is an increasingly global activity - and regulation needs to follow suit. In many cases, this requires the upgrading or replacement of systems to accommodate domestic volumes for SEPA, and consolidation of SEPA processing across multiple banking entities in multiple jurisdictions. Accenture has a wealth of experience in helping leading banks rise to such challenges. 17

Figure 5: The fast growing adoption of SEPA payments in the Eurozone SEPA Credit Transfer March Volume Snapshots Actual Extrapolation 90%-100%? 650-725 0.5% 4 2% 15 7.5% 38 March 2008 March 2009 March 2010 March 2011 March 2012 March 2013 March 2014 Source: European Central Bank SEPA Indicators 17% 97 28%-40% 155-240 35%-85%? 210-595 % SCTs of all credit transfers in the Euro area Million SCT txns for the month January 2012 25%139m txns Centralizing SEPA direct debit collections: Credit Agricole Group Credit Agricole Group is a European leader in retail banking with 54 million customers. CEDICAM is the group s payment flow and systems subsidiary. It operates primarily in the domains of electronic banking, payment and card processing, and security of payments. Client objectives CEDICAM aimed to be a leader in the payments business in Europe and reinforce its leadership position in France. The Group wanted to implement a new IT platform to process the collection of European payments under the Single Euro Payments Area (SEPA) Direct Debit scheme (SDD) as required by the European Commission and the French regulator. Accenture Solution To achieve these goals, Accenture was selected to implement a centralized shared payments IT platform. The new platform, based upon the Open Payment Framework (OPF) solution of Clear2Pay, a payment technology vendor, consolidates SEPA direct debit collections for Crédit Agricole s several French regional IT payment systems, and processes payment transactions for many of the Group s banks. Business benefits The project enabled CEDICAM to process high volumes of payments more rapidly and cost-efficiently through a single IT platform and accelerate the time it takes to launch new and greater value-added payment products and services, particularly for the Group s corporate customers. The solution allowed CEDICAM to handle SEPA direct debits within the compliance deadline, and this new platform is robust enough to also handle the ever-growing volume of other SEPA transactions, including credit transfers, international payments and high-value payments. 18

Accenture Payment Services Accenture Payment Services offers a comprehensive set of offerings to enable financial institutions to address all the hot topics we have described - and others that may arise. In today s rapidly-evolving payments landscape, we are helping more than 50 clients globally to develop the new payments strategies, operating models and capabilities they need to stay ahead of the game. We focus on five key areas. 1. Core payments Replacing legacy payments systems and operations enables banks to achieve the flexibility and efficiency they need. Our experience shows consistently that banks that reinvent their payments systems gain the ability to achieve high performance by creating more competitive and customercentric operations. Simplification and industrialization are critical factors in achieving these benefits. Our core payments services address five aspects of our clients payments activities: Payments strategy and operating models. Payments architecture. Core payments replatforming and transformation. Payments testing. Payments application outsourcing. By replacing legacy payments systems and operations, financial institutions can adapt to changes in the market more quickly and decisively, and at lower cost. Payments renewal requires up-front development of the new strategy, operating model design and architecture, as well as tried and tested execution abilities. Banks that choose Accenture to help them renew their payments systems benefit from an experienced design and implementation partner with global reach and unsurpassed resources and capabilities - qualities that enable us to mitigate execution risks and deliver business benefits on time and within budget. 19

2. Card payments Card payments are becoming an increasingly important part of a financial institution s business. And upgrading or migrating aging card platforms not only boosts their effectiveness and efficiency, but also helps banks migrate to more agile operating models. Significantly, amid today s structural and regulatory shifts, card payments is one of the few remaining areas that present banks with opportunities for significant revenue growth. Our card renewal services focus in four areas for clients: Card issuing and acquiring strategy, operating models and IT architectures. Card issuing and acquiring replatforming. Card testing and migration. Card application outsourcing. The rapid growth in digital commerce - both online and mobile - is driving wholesale renewal in merchant acquiring technology and operating models. Meanwhile, issuers are faced with changing consumer behaviors, new competitors and challenging economics. The cards technology market is less wellserved than that for enterprise payments technology - and banks face challenging decisions in areas including software selection, custom system building, technology acquisition or migration to third-party processors. However, those that successfully transform their card payments technology and operations are best positioned to achieve sustainable competitive advantage. Accenture Payment Services has a proven track record in helping banks do this. 20

Card payments replatforming: large UK retail bank Client objectives This client runs an acquiring network and well-established issuing business across the MasterCard, Visa and AmEx schemes in multiple currencies. It decided to migrate its entire card payments operations to a new platform, a switch that would demand a significant degree of customization to support its unique product offerings. The migration was planned to coincide with the implementation of a new call center application and cards data warehouse. Business benefits Our solution migrated 6.1 million cards to the new platforms - the largest cards migration achieved to date in Europe. We also established an effective project governance and management structure across numerous thirdparties, and integrated the new cards platform with a complex call enter GUI, including training and setting up 6,500 end-users. The transition to the new business-as-usual service model was delivered within eight weeks. Accenture solution Accenture joined the program at a time when it had run over time and budget. Our project review identified serious issues around delivery capability, and we were invited to lead the program with a new delivery approach. Our team delivered against the client s customization goals, and successfully implemented a big bang migration of all in-scope activities over a single weekend. We also helped to deliver the significant changes in business processes required by the replatforming, together with systems integration work to address 164 interfaces between the core platform and surrounding third-party systems, and changes to 52 interfacing systems. 21

3. Digital innovation Digital payments strategies and operating models are critical for success in today s marketplace, where point of sale, online and mobile channels are converging and new digital commerce models are emerging. And a vital enabler for digital commerce is the creation of digital and mobile payments solutions, including couponing, location-based services and digital business models. We provide clients with digital and mobile payments solutions that help them keep pace with the market in three main areas of activity: The digital channel is integral to the full customer purchasing experience of pre-payment activities - search and mobile marketing, for example - as well as payment and post-payment functions such as loyalty and customer care. By providing their customers with a compelling mobile payment experience, banks can provide exceptional, differentiated customer service while generating positive returns on investment. Our offering in Digital Innovation extends into these areas e.g. combining loyalty and coupon redemption with payments. Mobile and multi-channel strategies and operating models for payments and micropayments Mobile application development and system integration Mobile digital wallet. By way of example, we recently helped a bank to relaunch its mobile banking app, having rearchitected it to link directly to its core banking systems instead of via the ATM network. The compelling combination of an enhanced customer experience on the smartphone device, and the ability to initiate transactions from it, resulted in rapid uptake and strong growth in its first year that shows no sign of slowing. In the first 3 months of operation, there were over 1 million customer registrations, over 13 million customer logins per month, and around a million payments and account transfers per month from the mobile banking app. In contrast, the previous version had only offered basic balance enquiry functionality, and had seen poor customer take-up and usage. 22

Mobile payments: Global payments company Client objectives This client is a leading global payments company focused on credit card products and banking services. Seeking to incorporate mobile payment functionality into its portfolio of products, the client s initial objective was to develop a mobile payment custom solution. Key steps in this process included market assessment, identification of target demographic and evaluation of that target s mobile usage. Accenture solution To provide the insights needed for solution development, Accenture began by conducting a holistic strategic assessment. This included sizing the overall market for mobile payments, with identification of target demographic, and evaluation of online shopping behaviors and current mobile usage. We also quantified annual fraud rates in online transactions, and assessed annual fraud loss for payment companies and merchants. Using the outputs, our team then investigated the effects of modifying online current checkout flow, evaluated potential mobile message delivery options, and developed the optimal go-to-market strategy for the client. Business benefits Our in-depth strategic assessment revealed that fraud reduction would be the biggest financial opportunity arising from this mobile payment solution. To ensure the client would capture maximum benefit, we created a conceptual case for mobile authentication of online payments, and identified areas where fraudulent online purchases could be reduced, as well as pinpointing merchants with high online fraud exposures. As a result of this engagement, the client anticipates significant reductions in fraud and in fraud costs to merchants, as well as increased customer satisfaction due to the enhanced security capabilities we helped to design. Transaction banking strategy: Asia-Pacific bank Client objectives This client had identified two key problems: the lack of a coordinated transaction banking strategy across its group businesses, and a highly fragmented decision making structure in its endto-end payments value chain. These shortcomings reflected a legacy of underinvestment in payments infrastructure, leading to increased complexity and duplication, and pushing up the costs of infrastructure maintenance. With competitors seeking to be increasingly active in its core markets, this bank s CEO identified the creation and implementation of a new group payments strategy as a key initiative. The client turned to Accenture for help and advice. Accenture solution Accenture pulled together a handpicked project team with strong and proven skills around strategic planning and growth. Taking a collaborative approach with the client to ensure a pragmatic solution, our team began by performing a comprehensive market and industry assessment to identify growth opportunities, and an internal assessment of the client s existing business to identify strengths, capabilities, and key growth drivers. We applied the resulting insights to define a prioritized list of opportunities aligned to the client s business unit strategies and a range of agreed criteria. To enable the bank to seize these opportunities, we then conducted an operating model implication assessment from a model, process, organization, technology and governance perspective, and defined the high level road-mapincluding validation and alignment of in-flight projects and programs. Finally, we documented the high-level business case for the new strategy, for presentation to the client CEO and Board. Business benefits The client gained all the insights and evidence needed for an informed decision on whether to press go on the new strategy. The benefits included a detailed assessment of the most attractive opportunities in the payments market space based on the client s own strengths and capabilities, and a group payments strategy designed to realize these opportunities while remaining aligned with the existing business units strategies. Our team also defined a high-level roadmap that provides a clear transformation plan for the client. 23

4. Transaction banking As banks globally renew their focus on growth, the spotlight is on transaction banking, with the key strategic objectives of improving operational efficiency and generating new revenues. By refreshing their transaction banking strategies, banks can support these goals and drive incremental revenue growth through improved products and services for financial institutions and corporate customers. Our transaction banking payment services provide clients with solutions centered on three areas: Transaction banking strategy and operating models Bank-to-corporate payments connectivity Corporate payments and cash management applications. Focusing on these areas is now more important than ever since transaction banking has become a strategic business for many of the larger banks, regionally and globally. The existing business model has generally proved resilient during the financial crisis as a valuable source of liquidity and revenue. However, transactions are commoditizing, and both financial institutions and corporate customers are becoming more demanding. Specifically, corporations want simpler, wider and more effective connectivity to the banking system, with improved access to value-added services. For their part, banks want credible players as partners to help them achieve their payments processing, product and geographic goals, at the scale at which they operate. Our experience shows that our banking clients can revitalize their transaction banking capabilities to achieve competitive differentiation through payments and position themselves as industry high performers. 5. Compliance, risk and operations To achieve the twin imperatives of regulatory compliance and operational efficiency, it is vital for banks to focus rigorously on ancillary services such as fraud detection, liquidity management and business activity monitoring. And operational efficiency in payments - in areas including operational liquidity management - underpinned by effective compliance and risk management processes is critical to any modern, competitive operation. In combination with our payments and cards renewal capabilities, we offer payments compliance, risk and operations consulting and technology services for areas including: Sanctions, AML and fraud Operational liquidity management Business activity monitoring. In tackling these areas, banks must manage the impacts of several fundamental shifts in the marketplace, including rapid growth in the volume of electronic transactions, new regulations particularly for sanctions, anti-money laundering (AML) and fraud detection and the trend toward real-time processing. By helping banks transform these ancillary services, we can enable them to manage risk and operational efficiency more effectively in today s competitive and fast-moving payments environment. 24

Sanctions screening consolidation: major European retail banking group The client had recently completed a The client had recently completed one of the largest European banking mergers with another large financial services provider, and wanted both heritage regimes to follow a consistent approach to sanctions screening. Client objectives The client s aim was to develop a consistent screening solution based on the existing applications in place, by integrating customer and payments systems into the current systems without impacting the operations. Accenture solution The complex environment required oversight and management across multiple projects and divisions to ensure that changes required by the integration program did not adversely affect ongoing sanctions compliance and projects. In addition, existing tactical solutions needed to be replaced with a fully integrated, consistent screening system comprising of centralized hubs. Having previously worked on the initial design and implementation of the client s sanctions screening functionality, which was based around third-party products, Accenture provided proven vendor, project and program management expertise to both the integration and consolidation programs. Business benefits Accenture helped the client meet its risk and regulatory compliance requirements within an extremely short timeframe, executing implementation at 5 locations in five months. In the client s domestic business, between 100,000 and 150,000 cross-border payments are now filtered daily, generating an industry standard 1 percent to 2 percent hit rate for investigation. Staff numbers and hit rates are expected to decline over time by up to 10 percent because of process efficiencies and further refinement of the filter rules. 25

Why Accenture? Accenture Payment Services is differentiated in the marketplace by the unique combination of deep industry expertise in banking, robust technology capabilities, and unsurpassed global outsourcing delivery experience. Our rigorous design and implementation methodology is supported by multi-level architectural models, a vast repository of payment and card processes, and deep technical and performance expertise. A key pillar of our client offerings is our blend of global reach and local relevance. Every client team has direct access to our wealth of global experience and best practice drawn from payments engagements worldwide, supported by seamless sharing of resources and skills across borders. This global consistency of approach is underpinned by our unique Global Delivery Network (GDN - see information panel), which provides points of concentration for industrialized systems delivery, maintenance and outsourcing. The GDN is complemented by our dedicated groups of payments systems architects and implementation specialists in countries and regions around the world, bringing to bear deep knowledge of local conditions and regulation. Together, these assets and capabilities mean Accenture can provide all the knowledge, resources and capabilities that banks need from their partner in order to execute an effective change journey in the payments domain. We have more than 50 major payments clients worldwide and over 1,500 personnel dedicated to payments engagements, plus hands-on experience in systems integration projects involving most of the world s major payment solutions. Our payments clients also benefit from insights and demonstrations generated at the Accenture Payments Innovation Showcase, part of the Accenture Technology Lab facility in Sophia Antipolis, France, which leads and highlights emerging trends and technologies in payments. To find out more about how Accenture can help your bank transform its payments strategy, operations and capabilities, please contact: Massimo Proverbio Global Managing Director - Accenture Payment Services massimo.proverbio@accenture.com Jeremy Light Lead - Accenture Payment Services, Europe, Africa and Latin America jeremy.light@accenture.com Jim Bailey Lead - Accenture Payment Services, North America james.e.bailey@accenture.com Matthew Friend Partner - Accenture Payment Services, North America matthew.friend@accenture.com Ian Hooper Lead - Accenture Payment Services, Asia-Pacific ian.hooper@accenture.com Or visit www.accenture.com/payments The Accenture Global Delivery Network With 146,000 professionals in more than 50 centers, Accenture offices and client locations worldwide, the Accenture Global Delivery Network is the largest and most diversified group of technology, business process and outsourcing professionals in the world. Our delivery centers are located in the Americas, Europe, Latin America and Asia Pacific, providing a truly global footprint, and working fluently with our people based at client sites to enabling fast, efficient, world-class service delivery 24/7. 26

Accenture Payment Services Accenture Payment Services helps banks improve business strategy, technology and operational efficiency in five key areas: core payments, card payments, digital payments, transaction banking, and compliance, risk, and operations. Accenture and it s more than 1,500 professionals dedicated to payment engagements can help banks simplify and integrate their payments systems and operations to reduce costs and improve productivity, meet new regulatory requirements, enable new mobile and digital offerings, and maintain payments as a revenue generator. More than 50 clients worldwide have engaged Accenture Payment Services to help them turn their payment operations into high performing businesses. About Accenture Accenture is a global management consulting, technology services and outsourcing company, with more than 246,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$25.5 billion for the fiscal year ended Aug. 31, 2011. Its home page is www.accenture.com. References 1 Source: http://www.edigitalresearch.com/ news/item/nid/395934273 2 Source: http://www.worldpay.com/ globalexports/ 3 Source: http://www.safaricom.co.ke/ fileadmin/about_us/documents/press_ Release_Commentary_September_2011. pdf Copyright 2012 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. 12-0937