In-Memory Computing for Customer-Centric and Transactional Banking Creating a Holistic View of Customers for Timely, Innovative Offerings

SAP Thought Leadership Paper In-Memory Computing

Table of Contents

5 Technology Brings Challenges 7 Revolutionizing Customer-Centric and Opportunities for Banks and Transactional Banking Multiple Systems Give Way to Real-Time Customer Analysis a Consolidated Landscape Raises Revenue and Profitability Mobility and Social Networking Real-Time Analysis Helps Change the Game Prevent Customer Churn Customer-Centric and Trans Prevent Money Laundering actional Banking Come Together and Fraud in Real Time In-Memory Computing Gives Banks Real-Time Customer 9 Changing the Game Insights Finding the Right Path to In-Memory Computing

About the Authors Klaus Pohl, Gert Schick, Volker von Seggern, and Drazen Tomic work in the Business Transformation Services group of the SAP® Consulting organization. They provide support for the financial services segment in Europe, the Middle East, and Africa. This includes value-based services and methodology that help financial services firms translate business strategy into optimal IT architectures and solutions. The group also helps customers optimize business processes by leveraging enterprise architectures, process models, and benchmarks that are specific to the financial services segment. To gain a full understanding of your customers and create the exceptional banking products and service that foster loyalty and long-term relationships, you need information that is timely, reliable, and robust. From a common database, in-memory computing helps you rapidly process massive amounts of customer-centric and transactional banking data. You get the information you need to make real-time or near-real-time business decisions, minimize customer turnover, detect fraud, and prevent money laundering. Creating Profitable Customer Relationships for the Long Term

Technology Brings Challenges and Opportunities for Banks

Enhancing long-term customer value Usually, there’s a single repository on Distributed systems can present a huge tops the agenda for every bank executive the customer-centric side that handles all impediment for banks’ marketing today. In mature markets, especially in customer-related data. For transactional campaigns. To be effective, marketing times of intense competition, banks must banking, there are usually silos of appli- campaigns must target customers with make each customer relationship as cations for individual products or orga the right products at the right time. To profitable as possible. To achieve business nizational units or both (see Figure 1). prevent defections, banks must quickly growth through increased customer This heterogeneous landscape must be identify patterns of customers willing to loyalty, they need a strong understanding adapted to integrate data, analyze it terminate their banking relationships. of customer preferences and banking holistically, and create a unified profile In distributed systems, this information habits. of individual customers and groups of gets lost in a massive amount of data This knowledge is especially important customers. or features – making it difficult to analyze at a time when a bank’s competition offers Such integration generally requires a past customer behavior or predict future the same or similar products, thus elimi- complex infrastructure for data replica- behavior. At a time when reducing cost nating a key market differentiator and tion that can involve several data marts is key to profitable customer relation- making it easier for customers to change – or even several data warehouses – and ships, these outdated systems have also institutions. With the right information, adjacent extract, transform, and load (ETL) become very expensive to maintain. banks can more effectively meet new systems. Most banks find that it is very Recognizing these problems, many customer expectations, including expec- costly and time-consuming to normalize banks have made the consolidation of tations for highly personalized service, data into a single format for calculations banking software a top priority. They and achieve profitable long-term rela- and other analysis. To maximize system know that such consolidation is vital to tionships with their customers. performance, the sourced information optimizing business processes and is often stripped down or aggregated. reducing costs. They also recognize the Multiple Systems Give Way to Even state-of-the-art technology with need to stay on top of regulatory require- a Consolidated Landscape service-oriented architecture can require ments that have become increasingly this data replication. numerous and complex. Chained to outdated IT architectures, many banks find it hard to capitalize on these new realities of examining cus Figure 1: Typical Architecture Pattern for Customer-Centric and tomer lifetime value. All too often, a patch- Transactional Banking Today work quilt of systems and applications blocks the holistic view of customers needed to create and deploy new Customer-Centric and Transactional Banking offerings. Customer-Centric Banking Transactional Banking This is partly due to the fact that applications for customer-centric banking Marketing Sales Service Invest Collat Pay Deposits Loans processes (marketing, sales, and service) ments erals ments and transactional banking processes (deposits, loans, investment, collateral, Customer information management and payments) have increased signifi- Master Master Master Master Master data and data and data and data and data and cantly in recent years. These applications business business business business business Business partner/ use different technologies and databases trans trans trans trans trans opportunities/ actions actions actions actions actions from different vendors. In addition, the total commitment next layer of applications, data, and processes for customer-centric banking Replication are often separated from those for transactional banking.

SAP Thought Leadership Paper – In-Memory Computing for Customer-Centric and Transactional Banking 5 Mobility and Social Networking Customer-Centric and Transac- In-Memory Computing Gives Change the Game tional Banking Come Together Banks Real-Time Customer Insights Real-time access to banking services and To provide the specific products and ser- products via mobile devices – and to the vices each customer wants, a holistic view Banks can make the most of today’s market response to these offerings via of the customer is necessary. This view market opportunities with innovative social networking – is creating a new level can only be achieved by integrating all technology for in-memory computing of customer expectations. At a mini relevant data – from both customer-centric that offers deep, real-time insight into mum, customers expect to access their and transactional banking applications. their customers. This technology makes accounts and pay bills via mobile devices. A deposit application for transactional it possible to analyze massive quanti They also expect banks to respond imme- banking may need detailed information ties of data in local memory. By providing diately to their complaints and inquiries. about the bank’s business partners that the results of complex analyses and To stay in the game, banks must also is stored in customer-centric banking transactions in real time, it helps banks offer innovative services and products – applications, for example. make responsive, even proactive, busi- such as forecasts of customer payments Siloed transactional banking applica- ness decisions. New approaches to table as well as real-time tracking of payments tions must also exchange data among structures and analysis support higher and other customer actions by specific themselves. Covering a secured loan, for data volumes and faster analysis than location. Today, flexibility and a quick time example, requires interaction and data was previously possible. to market for such innovations offer an exchange between loans and collateral Up to 3,600 times faster than standard important competitive advantage. applications. analytical computing, in-memory comput- In addition to increasing customer The massive data exchange needed ing also fosters highly granular insight expectations, technology has given banks – both among the siloed transaction‑ into data, streamlines the management a new source of information about their al banking applications and between of large volumes of data, and reduces customers’ habits and opinions via social customer-centric and transactional IT complexity. Regulatory reporting and networking. By carefully mining this infor- banking applications – can jeopardize real-time business decisions are based mation, you can easily spot new market data integrity, make reconciliation hard on reliable information from a single source trends and opportunities. to manage, cause delays, and add cost. of truth, and banks can reduce the cost It may also make it difficult for banks to of operating their analytical systems. provide suitable services, products, or The new technology transforms customer marketing campaigns to their customers data into forward-looking business strate- at the right time. gies by combining a real-time, 360-degree There are operational consequences view of customers with customer-oriented as well. Banks face competing objectives processes. in end-of-day (EOD) processing. When applications are siloed or otherwise separated, EOD processing involves trans actions for a defined period (workday, month, or quarter) for tasks such as creating and reporting daily balances. While EOD processing should start as late in the day as possible for maximum business flexibility, it should end as early as possible to provide daily balances and start the extensive data exchange among applications. Faster processing of data can help to satisfy these competing objectives. A Two-Step Approach to a Real-Time, Holistic Customer View

Revolutionizing Customer-Centric and Transactional Banking

Supporting customer-centric activities Real-Time Customer Analysis valuable customers. This real-time, holistic with information from transactional Raises Revenue and Profitability view gives sales, service, and marketing banking applications within a reasonable processes timely access to customer amount of time requires a specific data- As a first step, banks can achieve quick information held in transactional banking base that provides a complete overview wins using in-memory computing tech systems. of a customer’s relationship with a bank. nology in an existing customer-centric In-memory computing technology also In-memory computing technology pro- and transactional banking system to makes it possible for banks to offer tools vides the foundation for this database offer a 360-degree, “total commitment” that help customers analyze their own (see Figure 2). view of relationships with their most financial habits – such as long-term spending behavior – thereby enhancing customer satisfaction, revenue, and Figure 2: First Step in In-Memory Computing profitability. The technology also helps banks segment real-time data into target customer Customer-Centric and Transactional Banking groups and gives sales and service employees immediate access to this and other Customer-Centric Banking Transactional Banking information on their mobile devices. Real-time access to multiyear payment Marketing Sales Service Invest Collat Pay Deposits Loans ments erals ments transactions helps service employees and sales representatives manage cross- Customer information selling and up-selling activities. management Master Master Master Master Master data and data and data and data and data and business business business business business Business partner/ trans trans trans trans trans opportunities/ actions actions actions actions actions total commitment

Shared data for total commitment and end-of-day processing (in-memory)

Replication

In-memory computing helps you rapidly process massive amounts of customer-centric and transactional banking data.

SAP Thought Leadership Paper – In-Memory Computing for Customer-Centric and Transactional Banking 7 Real-Time Analysis Helps Prevent Money Laundering database. This includes applications that Prevent Customer Churn and Fraud in Real Time handle information on business partners, new market opportunities, and total In a second step, banks can use the shared As banks update their application infra- customer commitment as well as those database to build new rules engines and structures over time, the step-by-step that manage product-related master other analytical features that improve implementation of in-memory comput data and business transactions. decision making and bring the right prod- ing will lead to a new banking architecture With this architecture, data replica‑ ucts to customers at the appropriate that integrates customer-centric and tion among transactional banking appli- time. Real-time, in-memory computing transactional banking processes with cations and between those applications can also help banks simulate patterns processes for analytical banking and applications for customer-centric of customer churning and identify custom- (see Figure 3). banking will no longer be necessary. ers who are about to defect to other insti- In this scenario, all applications for EOD processing can be accelerated and tutions – an important move toward customer-centric and transactional will no longer be a limiting factor in over- proactive banking. banking share a common in-memory night processing, providing more flexi bility in working hours and availability of services. As a result, banks can identify Figure 3: Architecture for Customer-Centric and Transactional Banking patterns of fraud and money laundering with In-Memory Computing in Step 2 activities in real time and significantly reduce losses in these areas.

Customer-Centric and Transactional Banking

Customer-Centric Banking Transactional Banking

Marketing Sales Service Invest Collat Pay Deposits Loans ments erals ments

Customer information management

Business partner/opportunities/total commitment/ product-related master data/business transactions (in-memory)

Up to 3,600 times faster than standard database technology, in-memory computing fundamentally changes the way banks can use data to create insight and increase performance. Complex queries yield instant insight, helping you stay ahead of the competition. SAP HANA® Drives Banking Transformation

Changing the Game

The in-memory computing technology Figure 4: The Steps of SAP HANA Usage Assessment offered by SAP HANA® appliance software can be a major driver for business and IT transformation in banking. SAP HANA Analysis Design and Planning Justification combines an in-memory computing engine with commodity hardware systems that Step 1 Step 2 Step 3 Step 4 are specifically designed to process real- time data using in-memory technology. Business Analysis Develop Develop Cost Massive quantities of real-time data can strategy of the ment of ment of benefit be processed in the main memory of a business solution SAP HANA and risk server to provide immediate results from strategy portfolio implemen analysis Evaluation and tation analyses and transactions. criteria architecture approach We can also help you get the greatest built on the and road benefit from in-memory computing – from SAP® HANA map identifying suitable business and tech- Business Process platform analysis nology scenarios to implementing the requirements focused on software that will help you realize those SAP HANA Midterm Development scenarios. Together we can: use cases References vision strategy •• Discover the areas in your business Process landscape in which SAP HANA can deliver Release additional benefits and value strategy •• Develop a target architecture for your IT System Project business processes and the supporting requirements analysis experience applications, including SAP HANA System Ongoing IT portfolio •• Derive the best transformation path initiatives to integrate SAP HANA into your business Current IT landscape •• Execute a business case for using SAP HANA

SAP Thought Leadership Paper – In-Memory Computing for Customer-Centric and Transactional Banking 9 Finding the Right Path to Step 3: Which is the best transfor Learn More In-Memory Computing mation path to integrate in-memory To learn more about the many ways that computing? SAP HANA and in-memory computing can We help you define a road map for each In a third phase of the assessment, we help your institution, contact your SAP in-memory use case that aligns with define implementation and migration representative or visit us online at your overall business strategy, create a scenarios for the new landscape. We also www.experiencesaphana.com/welcome. prioritized list of business objectives for establish a project framework and master And to learn about the in-memory support, and determine how plan that include organization structure Business Transfor mation Services group of SAP Consulting, visit to meet those objectives. and required governance. www12.sap.com/services-and-support The four steps of this assessment (see /transformation/business.epx. Figure 4) answer the following questions: Step 4: What are the benefits and risks of implementing SAP HANA and when Step 1: Where can in-memory comput- will the investment pay off? ing deliver additional benefits and The last assessment phase weighs your create value? one-time investment and recurring costs In the first phase, we help you analyze against potential tangible and intangible your current business strategy, process- benefits using a return-on-investment es, and software portfolio and align calculation and high-level risk analysis. your business and IT strategies. We also explore business requirements and processes where in-memory computing could best be used.

Step 2: What would a target IT architecture using in-memory computing look like? We then develop an in-memory-based target application portfolio and the target architecture for both in-memory computing solutions and supplemental solutions. We create high-level prerequisites for the technical infrastructure and its blueprint and help you identify the potential risks, strengths, and weakness‑ es of the new landscape.

The in-memory computing technology offered by SAP HANA appliance software can be a major driver for business and IT transformation in banking. www.sap.com/contactsap

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