As the costs and complexities of operating a private bank increase, many are looking to outsource their
core banking operations to external providers. Jean-Philippe Bailly, COO at Nordea Bank, spoke about the
bank’s technology overhaul at Temenos’ TCF event, earlier in the year, in Barcelona. John Schaffer reports
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By GlobalDataShifting away from legacy systems to the new breed of software as a service (SaaS) solutions is often a challenging decision for the operations departments of private banks, where there is a trade off between developing or upgrading a technology system in-house or outsourcing the operation.
The Temenos Community Forum (TCF) in Barcelona allowed banking technology vendor Temenos to showcase some of its touted success stories, in a bid to court new banks and financial institutions. Nordea Bank SA, the Luxembourg headquartered international private banking arm of the Nordea Group, went live with Temenos’ WealthSuite software solution in January 2016.
The transformation process to Temenos’ front to back core banking wealth management system took three years, moving from a multi-system front-office workspace in favour of a single workstation. The process was achieved in partnership with consultants from Deloitte and Syncordis.
Nordea said that the implementation of WealthSuite has reduced the complexity in its operations – allowing the bank to halve the number of separate systems and interfaces it runs, resulting in greater levels of automation as well as reduced IT maintenance costs.
Jean-Philippe Bailly, COO Nordea Bank SA, said when the implementation had been completed:
“Considering the scope of what has been achieved, to deliver such a level of transformation in three years ‘from decision to production’ is a remarkable result. We have paved the way for ongoing client service innovation while running the bank in a simpler and cost-effective way, in full compliance with present and future regulatory requirements.
“We are developing the future ‘relationship bank’, and our aim is to stay connected with our customers in all touchpoints, allowing us to engage with them anywhere, anytime.”
Clearly a decision to undertake a major technology overhaul cannot be taken lightly. Bailly said at the TCF event that Nordea had taken a year to decide upon a solution for its wealth management technology systems. The predicament involved whether Nordea would upgrade its incumbent “Olympic” system in favour of an outsourced system such as Temenos T24:
“Nordea Bank Luxembourg had reached a few operational and strategic crossroads in 2013. The operations department underwent a year-long research and assessment process. An extensive analysis of the operational and infrastructural fronts gave a clear overview of the IT landscape at the time.”
Bailly added that Nordea came to the decision to completely replace its core banking system and adopt Temenos’ SaaS. This was largely due to the upgrades needed to the ageing business computer infrastructure, which would have incurred a higher cost than the Temenos alternative. Nordea was running on an IBM AS 400 server system which was seven years old, and had surpassed the industry’s standard lifecycle (five years).
Another incentive for the change was to gain access to new markets. Nordea’s application licenses only covered Luxembourg, Switzerland and Singapore.
Bailly said: “We could no longer rely only on our traditional markets as our customers aren’t just banking from core market locations.”
Bailly added that deploying operations across borders would have incurred higher costs, whereas lowering the bank’s IT footprint and managing new markets from the bank’s hub will be more practical and cost efficient. He said that the move to the new system will allow Nordea to concentrate on its strategic markets of France, Germany,
Spain, Austria, China, Hong Kong, Thailand, Malaysia and the Nordics.
The incentive for change also had a client centric focus, with improvements in front office activities as well as a stronger digital proposition.
The implementation had the advantage of streamlining the bank’s IT systems by replacement of 24 legacy applications with eight new applications. Bailly said that one of the key benefits was the improvement of headcount efficiency in financial reporting by 30%. This was due to consolidation of entities, granular reporting, superior data
indexing and a streamlined process for audit.
He added that there has been a 47% reduction in the IT applications used by the bank – allowing for increased agility, and the ability to be more client-centric. Bailly said that the aim was to shift 25% of time spent on the back office towards client facing activities. Although Nordea’s systems have experienced a major overhaul, there is still
room for improvement. Bailly told PBI that more efficient onboarding of clients is one of Nordea’s top priorities.
“It’s manual and primarily document based. I think we can go much faster and also the experience for the client will be much better. We are aware it’s not the best solution because we have to issue a document, sign copies, send them back – it’s not efficient at all. Improvements are on the plan but I don’t think we’ll do anything before next year.”
Bailly added that there could be improvements in the way the bank utilises analytics: “We need to do more on the behavioural side. We have not started the journey yet but there are plans. We are more focussed in the profitability from asset growth.
“Analytics will benefit the needs of the clients. It will result in significant profitability because you can target the marketing. Currently, it’s more difficult, more manual – it can be more systematic and scientific – with less feeling. Then you can better match the requirements of the clients.”
Bailly went on to say that Nordea is currently working with Temenos to implement a product called Proposal Generator to improve its analytics capabilities.
Bailly spoke about Nordea’s future technology plans in the private banking space, through the implementation of additional modules on the Temenos system. This includes the addition of E-banking trading functions, mobile solutions, treasury functions; a MiFID II and investment advice proposal generator, and an online AML system.
However, Bailly told PBI that there are no plans to adopt a robo-advice style service, in light of international private banks such as Charles Schwab and Santander adopting automated advisory services to compete with the swathe of fintech disruptors.
