Standardization of Lending Services: A Peek Inside

Standardization of Lending Services: A Peek Inside 29 th June, 2011 Anjali Joglekar, FERNBACH-Software S.A. Karin Fischenbeck, BIAN

Agenda 1 2 3 4 5 6 7 BIAN & FERNBACH-Software Introduction BIAN FERNBACH Association BIAN Deliverables - Lending Supporting the BIAN Service Landscape Evaluation Interoperability with other Service Definition Workgroups Next Steps Outlook for 2011 BIAN Benefits 2

The Power of Joint Standardization: BIAN Founded in 2008, the Banking Industry Architecture Network (BIAN) is a global, not-for-profit organization that seeks to develop standard Service Landscape and Semantic IT Service (A2A) Definitions for the Banking industry. BIAN will enable the next generation of banking industry solutions developed either in-house or commercially: By leading banks sharing their requirements for core services By leading software and services vendors to implement them based on standard semantics. 24 Members 9 Banks 7 Service Providers 8 Software Vendors 3

FERNBACH-Software Luxembourg International Headquarters Foundation: 1986 Austria, Vienna Foundation: 2008 Germany, Frankfurt Foundation: 1998 Switzerland, Wallisellen Foundation: 1997 UK, London Foundation: 2005 Hong Kong: Foundation 2007 South Korea, Seoul: Foundation 2009 India: Foundation planned 2011 China: Pre-sales and Business Consulting 2011 Singapore: Foundation planned 2011 FERNBACH Financial Software S.A. Finance & Risk Software for Banks 4

FERNBACH-Software : Product Line Finance Risk 100% focus on the banking industry Specialists in finance & risk Solutions enable an integrated approach to finance & risk management Quick integration through modular software packages and our bestpractice methods. Quick development, delivery and implementation of solutions, together with partners, to fulfil new requirements resulting from current legislation, market developments and standards FERNBACH Financial Software S.A. Finance & Risk Software for Banks 5

BIAN and FERNBACH Association FERNBACH joined the Banking Industry Architecture Network (BIAN) at the end of 2008 and assumed the role of Chairman of the Working Group for Lending Operations Key Driver: To be involved in the development of a market standard that will be directly incorporated into the further development of the product standard. Benefit for Customers: The components developed in the form of services can be considered as semantically stable, more so because interdisciplinary core competences of several providers and banks have been incorporated. 7

Overview: WG Lending Service Domains Reference Data Sales & Service Operations & Execution Analytics Business Support Business Partner Marketing Customer Loans Customer Loan Operational Contract Mgmt Market Oriented Analytics and Customer Behaviour Sales Financial Instruments Offer Management Servicing Customer Deposits Financial Markets Securities Port. Management Enterprise Level. Reporting, Strategy Management Market Data Banking Product Agreement Management Wealth Management Bundled Products Payments Cards Cash Management Trade Finance Messaging Calculation Serv. Finance and Risk Valuation Position Mgmt. Common Business Information Sales & Services Reporting Incoming Payment Allocation Cross Analytical Data and Methods Business Area Business Domain 1st-Level Service Domain 9

Service Domain Offer Management Offer Management is designed as a generic service Domain (aligned with Service Landscape Group) WG Lending is focused on the entire loan process Responsibilities mainly taken from Front Office Sub Process Activities Aiming to avoid Lending-specific Responsibilities Manages the lifecycle of an Offer and all Services needed within the part of the workflow for selling (Lending) Products Delegates activities mainly to Business Area Servicing Result (of process) is a decision for one or more Agreements Published!! 10

Service Domain Agreement Management Agreement Management has similar characteristics as Offer Management Generic Sub Domain Only Lending requirements considered Responsibilities mainly taken from Middle Office Activities Agreement = a signed and operating entity Decisions have been taken normal operation has started Typically operates on / over more than one operational contract Mainly delegates activities to Service Domains of O&E Business Area Changes to existing contracts triggered by business customers are also in scope Published!! 11

Service Domain Customer Loan Operational Contract Management Loan Front Office Processing Loan Middle Office Processing Loan Back Office Processing Specific Service Domain for Customer Loan Operational Contract Management Manages the operational contract between a bank and a customer of the bank (focusing on retail banking) Out of scope: Contracts between banks, line of credit Customer Loan Operational Contract Main business object Usually based on an agreement Ready to be Published!! Utilization Billing Invoicing Payment Securitization Financial Management Delegates activities to many business areas and business domains (e.g. Analytics for Financial Accounting). Prolongation Contract Management Default Contract end processing 12

Service Domain Incoming Payment Allocation Service Domain Incoming Payment Allocation Loan Front Office Processing Loan Middle Office Processing Loan Back Office Processing should be more generic but is currently very specific to Lending (aligned with SL Utilization Group) Billing Incoming payment allocation is responsible to allocate an incoming payment amount to receivables according to allocation rules and allocation directives. Main business objects are Payment Allocation, Incoming Payment Allocation Request and Incoming Payment Allocation Directive. Ready to be Published!! Invoicing Payment Securitization Financial Management Prolongation Contract Management Default Contract end processing 13

Business Scenarios (Use Cases) Consumer Loan Origination Creation of a new Loan from Offer, Agreement to Contract Gives a good overview as to how involved Service Domains work together Change Agreement (Deferral) Agreement has to be changed for a special Customer situation Shows the standard approach for changing a Loan Contract Change Agreement (Prolongation of Term) Customer wants to extend the term of an Agreement Uses the similar approach to change the agreement Incoming Payment allocation (simple Case) An Incoming Payment is used to pay interest and back payment of a Loan Contract Incoming Payment process (incl. Due Item Management) Like the previous, but uses additional due Item Definitions for the splitting and processing 14

Business Scenario: Consumer Loan Origination Scenario: Candidate comes to a bank to request for a standard Loan Contract Offer Agreement Customer Loan Operational Contract Business Partner Customer Account Collateral Admin Underwriting Message Payments Product Entitlement Analytics SAMPLE Evaluate candidate DISCUSS TERMS Capture customer details details Negotiate initial initial terms terms Agree Agree terms terms Initiate Initiate Agreement Initiate Initiate collateral Obtain Obtain Underwriting decision Collateral in in order order underwriting OK OK Initiate Initiateloan agreement confirmation Initiate Initiate new new loan loan Set Set up up new new loan, loan, open open account Send Send out out invoice invoice Register and and check check customer details details Set Set up up new new A/C A/C Administer collateral gathering Register & allocate collateral Administer underwriting Accept Accept Loan Loan in in principle Document checklist Customer docs docs in in Loan Loan agreement sent sentout out Invoice Invoice sent sent out out Standard pricing pricing Candidate pricing pricing Profitability check check Candidate request loan, standard terms offered Candidate interested, registered as prospect Customer specific prices obtained and terms negotiated Collateral requested, mail sent out to confirm Underwriting scheduled Collateral received and processed Underwriting confirmed New loan and account set-up First payment requested and returned Payment posted to account 15

Business Object Model Available as First Draft Packaging aligned with Service Landscape Service Domain Structure Focus Object perspective: Coarse grained View which shows the most important Objects and their relationships Shows dependencies between Service Domains at Object Level (on-to-one, one-tomany,...) 16

Business Object Model Lending Focus 17

Overview Lending is still involved in the extention of the current Service Landscape to a fully defined definition at BIAN Service Domain Level 1. The following Service Domains are currently in Scope of the Workgroup: Collateral Management Underwriting Payment Execution & Clearing Settlement Product Matching Customer Relationship Plan Consolidated Customer Activity Contract Due Item Management Payment Plan Calculation The next slide shows the overall Service Landscape version 1.5, highlighting the lending service domains. 19

Service Landscape Lending The existing SL with additional candidate service domains Reference Data Business Partner Customer Profile Customer Record Customer Record Syndicate Management Correspondent Bank Sub Custodian Sales & Service Operations & Execution Customer Loans Consumer Loan Corporate Loan Real Estate Loan Education Loan Customer Deposits Deposit Account Checking Account Consumer Finance E Branch Operations Trade Finance Customer Portfolio Channel Portfolio Trade Finance Services Letter of Credit Contractor/Supplier Agreement Contact Routing Financial Markets ATM Network Management Bank Guarantee Corporate Relationship Market Trading ATM Network Operations Dealer Workbench Trading Book Oversight Messaging Lending Regulatory & Legal Authority IVR Management Focus Counterparty Administration IVR Operations Trade/Price Reporting Message Investor Relations Program Trading Correspondence etrading Wire Room Corporate Alliance/ Marketing Internal Campaign Portfolio Securities Calculation Services External Campaign Portfolio Market Trading Consumer Loan Assisted Trading Financial Instruments Internal Campaign Execution Market Making Position Mgmt. Market Asset Maintenance External Campaign Execution Order Management Market Data Market Feed Operation Information Switch Admin Market Feed Administration Information Switch Operation Reference/Directory Mgmt Market Research Banking Product Market Asset Maintenance Product & Service Policies Product Training Product Deployment Product Design Product Portfolio Common Business Information Market Information Mgmt Knowledge Exchange Intellectual Property Portfolio Management Manual Channels Branch Management E Branch Management Call Canter Management Contact Dialogue Call Canter Operations Call Canter Operations Branch Operations Prospect Management Business Development Policies Market Position Assessment Brand Management Advertising Promotional Events External Campaign Design Internal Campaign Design Sales Sales Solicitation Customer Relationship Plan Customer Offer Product Specialist Sales Support Customer Entitlement Admin Product Matching Servicing Servicing Position Customer Agreement Servicing Issue Product Service Agency Product Broker Customer Event History Brokered Product Commission Agreement Customer Product Coverage Interactive Help Commission Transaction Servicing Activity Analysis Customer Advice Servicing Position Sales & Services Reporting (*) Consolidated Customer Activity Sales Solicitation Order Allocation Clearing & Settlement Securities Fails Processing Stock Lending/Repos Public Offering Private Placement Port. Management Investment Portfolio Planning Investment Portfolio Analysis Investment Portfolio Mgmt Bundled Products Deposit Account Product Combination Payments Payments Customer Agreement Remittance Services Cards Card Facility Card Authorization Card Capture Card Case Reward Points Agreement Merchant Relations Physical Items Product Inventory Item Mgmt Branch Inventory Management Product Inventory Distribution Distribution Operations Card Issuance Check Processing Collateral Admin. Collateral Asset Administration Collateral Management Cash Management Cash Mgmt & Account Services Cash/Currency Inventory Branch Currency Distribution Currency Exchange Lock Box Bank Drafts & Travelers Checks Position Management Accounts Receivable Customer Account Taxation Taxation Services Corporation Tax Advisory Svs Tax Administration Billing Billing Services Oper. Authorization Guideline Compliance Reconciliation Account Reconciliation Operation. Reporting(*) Product Quality Assurance Regulatory Compliance Compliance Report Product Pricing Catalog Employee Certification Underwriting Customer Credit Rating Credit Agency Svs Subscription Credit Agency Svs Operations Case Management Customer Case Case Resolution Analysis Transaction Engine Custody Administration Unit Trust Administration Hedge Fund Administration Mutual Fund Administration Trust Services M&A Advisory Services Corporate Finance Services Corporate Credit Facility Analytics Market Oriented Analytics and Customer Behavior Customer Behavior Models Cust. Behavior Model Portfolio Customer Behavioral Insights Market Analysis Competitor Analysis Customer Surveys Fraud Models Fraud Detection Fraud/AML Resolution Enterprise Level. Reporting, Strategy Management Corporate Strategy Corporate Policies Segment Plan Segment Assessment Business Architecture Corporate Communications Business Unit Budget Business Unit Operations Business Unit Administration Business Unit Fin Operations Continuity Planning Finance and Risk Valuation Bank Portfolio Analysis Market Models Money Market Risk Operational Risk Management Financial Analysis Customer Relationship Plan Securities Valuation Collections & Recovery Asset & Liability Committee Bank Portfolio Administration Credit/Margin Policies Production Risk Models Counterparty Risk Asset Securitization Factoring Treasury Management Treasury Administration Financial Market Research Financial Market Analysis Financial Control Resolution Financial Statements Cross Analytical Data & Methods Market Models Market Models Quantitative Analysis Business Support IT Management IT Policies & Plan Systems Architecture & Stds Development Environment Solution Development Solution Deployment Systems Administration Systems Operations Platform Operations Internal Network Operation Systems Assurance Systems Help Desk Security Mgt. Production Release Auditing Internal Audit Document Mgt. Document Services & Archive Archiving Document Services & Archive Purchase to Pay Procurement Order to Cash Fixed Assets Fixed Asset Register Accounting Customer Account Business Unit Accounting Reward Points Account HR Management HR Policies & Plan Employee Record Employee/Contractor Contract Employee Assignment Employee Payroll & Incentives Employee Benefits Travel & Expenses Employee Assessment Workforce Training Recruitment Org. Structure Mgt. Organization Model Reporting Financial Control Property Portfolio Branch Portfolio Site Operations Site Administration Maintenance Utilities Administration Equipment Administration Equipment Maintenances Legal Assurance Business Area Business Domain Suggested Domain Suggested Service-Domain 20

Version 1.5 Service Landscape Revised Existing Service Landscape Reference Data Party Party Data Management Party Profile External Agency Credit Agency Service Sub. Syndicate Management Correspondent Bank Sub Custodian Product Broker Product Service Agency Contractor/Supplier Agreement Market Data Market Feed Administration Market Feed Operation Market Information Management Credit Agency Svs.Operations Financial Market Analysis Financial Market Research Quantitative Analysis Market Data Dissemination Admin Market Data Dissemination Ops Financial Instrument Maint. Reference/Directory Management Counterparty Administration Product Management Product Design Product Combination Product Deployment Product Training Product Quality Assurance Product Pricing Facility Sales & Service Channel Specific Channel Management Channel Operations Branch Currency Distribution Distribution Operations etrading Product Inventory Item Mgmt Product Inventory Distribution Cross Channel Servicing Position Servicing Activity Analysis Contact Routing Contact Dialogue Interactive Help Marketing Business Development Policies Business Development Brand Management Advertising Promotional Events Prospect Campaign Portfolio Prospect Campaign Design Prospect Campaign Execution Customer Campaign Portfolio Customer Campaign Design Customer Campaign Execution Prospect Management Customer Surveys Sales Offer Management Underwriting Commission Agreement Commission Transaction Product Matching Sales Planning Product Expert Sales Support Customer Mgmt Customer Relationship Plan Customer Agreement Customer Product Coverage Customer Event History Customer Behavioral Insights Customer Credit Rating Account Recovery Servicing Servicing Issue Case Management Case Resolution Analysis Customer Case Card Case Consumer Products Consumer Loans & Deposits Secured Loans Unsecured Loans Consumer Finance Current Account Deposit Account Cards Card Facility Card Authorization Card Capture Merchant Relations Consumer Services Trust Services Remittance Services Currency Exchange Brokered Product Consumer Investments Bank Drafts & T Checks Operations & Execution Financial Markets Investment Management Investment Portfolio Planning Investment Portfolio Analysis Investment Portfolio Mgmt Trading Trading Book Oversight Dealer Workbench Market Making Assisted Trading Program Trading Market Trading Order Management Market Operations Mutual Fund Administration Hedge Fund Administration Unit Trust Administration Order Allocation Clearing & Settlement Securities Fails Processing Trade/Price Reporting Custody Administration Customer Entitlement Admin. Securities Valuation Corporate Products Trade Finance Letter of Credit Bank Guarantee Trade Finance Services Corporate Banking Products Corporate Credit Facility Corporate Loan Cash Mgmt & Accounting Svs Cheque Lock Box Corporate Financing & Advisory Services Taxation Services Corporate Finance Services M&A Advisory Services Corporate Tax Advisory Svs Public Offering Private Placement Ready to be Published!! Cross Product Operations Payments Payments Execution Check Processing Cash/Currency Inventory Wire Room Collateral Administration Collateral Management Collateral Asset Administration Collections Account Management Customer Account Position Management Accounts Receivable Account Reconciliation Fraud Detection Rewards Points Account Transaction Engine Operational Services Card Issuance Consolidated Customer Activity Rewards Points Agreement Billing Services Analytics & Risk Bank Portfolio & Treasury Treasury Management Treasury Administration Asset Securitization Factoring Stock Lending/Repos Asset & Liability Committee Bank Portfolio Analysis Bank Portfolio Administration Market Models & Analysis Market Models Money Market Risk Counterparty Risk Operational Models Cust. Behavior Model Portfolio Customer Behavior Model Credit/Margin Policies Production Risk Models Operational Risk Models Fraud Models Fraud Detection Enterprise Analysis Segment Plan Segment Assessment Product Portfolio Customer Portfolio Branch Portfolio Channel Portfolio Competitor Analysis Market Research Market Analysis Regulations & Compliance Guideline Compliance Regulatory Compliance Compliance Reporting Fraud/AML Resolution Business Support IT Management Systems Administration IT Policies & Plan IT Architecture & Standards Development Environment Solution Development Production Release Solution Deployment Systems Operations Platform Operations Systems Help Desk Systems Assurance Internal Network Operations Non IT and HR Enterprise Services Legal Assurance Internal Audit Supplier Management Procurement Company Billing & Payments Fixed Asset Register Buildings, Equipment and Facilities Property Portfolio Site Operations Site Administration Equipment Administration Equipment Maintenance Utilities Administration Maintenance Finance Financial Statements Financial Control Financial Control Resolution Tax Administration Business Command & Control Organizational Model Business Unit Budget Financial Analysis Business Unit Financial Ops Business Unit Accounting Business Unit Operations Business Unit Administration Human Resource Management HR Policies & Plan Employee Assignment Employee Record Employee/Contractor Contract Employee Certification Employee Assessment Employee Payroll & Incentives Travel & Expenses Employee Access Profile Employee Benefits Workforce Training Recruitment Knowledge & IP Management Management Manual Intellectual Property Portfolio Knowledge Exchange Corporate Relations Corporate Communications Corporate Alliance/Stakeholder Corporate Relationship Regulatory & Legal Authority Investor Relations Business Direction Corporate Strategy Corporate Policies Product & Service Policies Business Architecture Continuity Planning Document Mgmt & Archive Document Services Archive Services Correspondence 21

Interoperability with other Service Definition Workgroups Party (previously: Business Partner): Usage & Validation of existing Busines Object Model and Services ( Stress Test ) Payments: Usage within Incoming Payment Allocation interaction Analytics: Focus on Delegations for Profitability & Risk Valuation Services Approach: Show Delegations in Business Scenario Diagrams Example taken from Customer Loan Origination: Profitability check 23

Outlook for 2011 Contibute in the evolution of the Service Landscape at Service Domain Level (together with SL Team and other Service Definition Teams) Define more Service Domains at Level 1 (selection in alignment with Service Landscape Team, focus on those that can be found in Service Landscape for Lending) Define more Business Scenarios: Corporate Loan Origination Change Agreement (change of party, change of terms) Early repayment Arrears processing (especially Dunning ) Interface with other Service Definition Teams to define more concrete delegations using Business Scenarios Finalize & Publish existing Business Scenarios Finalize & Publish Business Object Model 25

Experience BIAN Benefits Simplify integration and reduce technology costs through standardization Achieve interoperable banking archiectures Share experiences with your peers Facilitate complex transformation projects Reduce integration costs and therefore minimize IT risks Learn more about IT and business architecture topics Actively shape an emerging industry standard 27

Explore BIAN in more Detail Visit the BIAN Homepage www.bian.org Have an individual follow up session arranged for your team Learn more about BIAN at selected Banking events, including SIBOS, Toronto (Canada), September 2011 Member-hosted events Join the upcoming webinars July 20, 2011: Introduction to BIAN Service Landscape 1.5, How-to Guide and Meta Model Time: 9 10 am CEST (3 4 am EDT) and 5-6 pm CEST (11 12 am EDT) Registration form will be provided in the next view days on the BIAN homepage! Tbc: Beginning of August: Service Landscape as reference Model for SAP / The Role of BIAN in the Architecture Management at SAP and with regard to the BIAN Service Landscape Watch out for announcements! Link: http://www.bian.org/content/bian_webinars/index_en.html 28

Questions? 29

Contact BIAN for Additional Questions BIAN 2009, BIAN Banking Industry Architecture Network 30