Keywords: erp in banking sector
Banking industry has progressed greatly but still growing exponentially covering whole range of orders and products under widespread umbrella. When all such activities are carried out by a lender, it is known as Core banking.
Other main reasons aside from financial drivers, for deciding on core banking system are Globalization, booming IT industry and consolidation of market sectors. Today banking sector is feeling limited of these present systems due to consolidation of establishments and ongoing increasing demand from customers as well as data management pressure. Therefore the majority of the banking companies are focussing on growth somewhat than cost decrease.
Benefits and Potential customers of ERP for Bank Industry
Banking Sector has huge potential for applications of ERP due to its vast data oriented nature. ERP offers intensive integration among various modules. It combines information, users and various operations for better output.
It helps in decision making which includes decision for strategic, tactical and operational planning and uses various technologies that assist in conserving time, reducing cost, and effective communication.
It provides solution for various things which include cash accounting, repayment processing, security of cash and cash management. ERP systems also help in analysing financial condition of any enterprise, accounts management and prep of financial accounts and assertions.
All the back office systems and financial system can be included using ERP systems. Helps in effective cash flow by simplifying handling of outgoing and incoming payments.
It offers facility for sharing various functions of banks with customers, distributors and partners. Reporting, planning and analysis of bank resources are combined in one process, and everything is on single program.
Provides tools which monitor every transaction in real time and other important range of services.
An ERP system is also responsible for strengthening the logistical capacity which includes handling of non-banking goods and services and controlling of bank notes.
MEETING TODAY'S CHALLENGES
Banking sector is facing tougher competition and calls for rapid change. Additionally regulatory and legal requirements want information to be accurate & most important of all, it ought to be well-timed. Transparency is also a common necessity. Successful banks are usually more flexible and effective in this aspect. They may have boosted the success of their finance institutions and manipulated their costs even in such environment. To be able to achieve the goals lenders should assess an IT investment in order that they can offer fast return and also decrease the heavy operating costs.
At present banking companies have following needs:
IT constructions should be versatile and allow quick adjustments available procedures.
Efficient business techniques and IT buildings that are comparatively less complex
Employees should maintain a position to access tools, alternatives and individualized data at any time and from anywhere
Core technology should not be harmed while integrating new operations and functions. Integration should be quick and simple.
In order to meet all the demands and increase the transparency level, ERP should improve the efficiency and furthermore it should increase the Integrations between the existing technology and various business functions. ERP solutions also needs to give a secure access and definitely it ought to be readily available to all the people from organizations and to the partner, customer and the vendor.
Cash Management
Teller Operations
Position Management
Technical architecture
Open source software
CASE STUDY-IDBI BANK
IDBI Bank was established in 1964 by the federal government of India. IDBI became commercial loan company in 2004 with a network greater than 700 branches and roughly 1200 ATM's
IDBI AND Key BANKING
After the drastic change in top management in January 2001, the bank thought a need to improve the technology system so that bank or investment company can enhance itself in order to fulfil the issues in the foreseeable future. Inadequate network pressured IDBI to look at a technology system which allowed IDBI to talk to its customers by using many delivery channels. Scalability & Complete integrated solution was the need of the hour. IDBI initially used centrally system from Kindle but it was proving to be inefficient to meet new goals, so that it was improved.
Pre-requisite of IDBI- Agility of the business enterprise and Time for you to market
IDBI required a system that would provide loan provider the flexibility besides quick and easy solution to unveiling various products easily. They required the perfect solution is that offered them a period to advertise and which can offer faster core bank solution. Key driver for the lender was to achieve business agility that was technology driven.
Choosing a Vendor-Solution Guide (Deployment Architecture- Appendix fig 2)
Finacle by Infosys was finally deployed after a detailed advancement of different solutions. It was deployed for commercial and retail banking, e-business and consumer operations.
Another important point in IDBI's successful execution was the time taken for execution. It was done across entire bank in an archive time of five and half months.
This provided IDBI critical time to market advantage that they badly needed and furthermore they were able to rotate out products at a considerably faster rate than before. Like for e. g. "Welcome Set" was introduced-concept comprising the deliverables that customers generally expect on day 1 which include cheque book and phone banking and e-banking details. This reduced enough time taken to start an account which initially took at least 6-7 days.
Advantages of Finacle (Functional Structures- Appendix fig. 3)
Main differentiator was most advanced technology. Various types including right through handling, 24*7 banking, E-Xtensibility tool package were deployed by Finacle. With the help of Finacle which proved to be the right choice IDBI helped bring down their End of Day control time by more than 79%.
After Implementation of Finacle
Capabilty of managing 3 lakhs orders in a day from 8 lakhs customer accounts
IDBI became 3rd major pvt. loan company in terms of circulation of branch sites.
Retail bank sector of IDBI is continuing to grow to numerous folds after deployment of Finacle. It also helped in rolling out of new products and services quickly. Services include the debit cards, present cards and family accounts.
Finacle offers customers a unified view of the relationship with loan provider which assists with achieving customer satisfaction.
Helped in process centralisation.
Challenges encountered by the Vendor
To manage up with the active and ever-changing business procedures and consumer needs
To be in-line with the regulatory guidelines
To assist the banking service with regular up gradation.
Integration with Legacy Systems
Integration of ERP Modules of different suppliers or versions and E-Business Applications.
IDBI decided for restructuring in 2008 for various sections that have been customer focussed. Restructuring was done to streamline the business processes and improve the quality of customer service. Robust system was required so that all the managers may easily monitor revenue from each branch and also from each of its products which can only help in increasing the profitability of the organization and also to maintain the expansion.
Problems before ERP
IDBI was not in an ailment to evaluate success of each segment of business at different level like customer and branch level.
It was very important to IDBI's future development to determine the performance of their business units & products which was extremely hard.
IDBI Bank goes with Oracle Apps
Implementation Process was essentially carried out in 2 phases:-
Performance Management System was deployed in 2008 including modules of Oracle like
Transfer Pricing
Profitability Manager
Financial Services & Profitability Analytics
All these systems helped the bank to raised analyse the performance of individual business product and take necessary action if in case it had not been achieving the required profits.
Oracle Consulting was engaged in '09 2009 to deploy
Oracle Hyperion Planning
Integrated Methodology Delivers Greater Control
Oracle Transfer Pricing
NII contribution can be measured from assets & liabilities with the help of oracle transfer costing. It also allowed the staff to dissect NII contributions & belongings and liabilities.
Oracle Success Manager
For allocation of costs which relates to banks occupation and other branches, Oracle profitability supervisor was used.
Effect:-
Since the data is coming from the solitary source, Earning information which used to have 2-3 days, is now able to be produced within a couple of hours.
Oracle Financial Services and Oracle Profitability Analytics (Appendix physique 4)
Information regarding success was provided over internet using Oracle Financial Services Success Analytics. Now staff was able to analyse different trends, variances and the positions across lines of business and products.
With the assistance of the machine there was a better access to important information which allowed Older managers and other decision makers to accurately measure the performance of their portfolios and also their responsibility areas on a continuing basis
It helped in bettering decision making quality which eventually increased the entire gains of the bank
Capability to Evaluate Performance of Employees
Performance assessments can be done on individual members of personnel by the Oracle solution. Additionally it can be done at the group level also which allows IDBI to develop an appropriate praise system. It also helps in assessing the efforts which are made at different levels.
Automated Liquidity and Rate Risk Measurements
Oracle Risk Manager
To assess the liquidity and interest rate risks that happen to be calculated on daily basis, IDBI Loan provider used Oracle Risk Director. It helped IDBI to select the best place to allocate their funds. In addition, it helped various analysts and other bank or investment company managers to measure the effect of interest as well as the impact on NII or financial value.
Effect:-
Advance evaluation of resources and liabilities
Helped in producing key info including the avg. cost and financial return across various products, which finally helped to make better decisions.
With the assistance of Oracle Risk Supervisor, IDBI became the very first PSU bank which generated studies on asset liability management on daily basis.
Streamlined Budgeting and Planning
Oracle Hyperion Planning (Appendix- Body 6, 7, 8)
To create costs as well as for rolling forecasts Oracle Hyperion Planning was used, that have been basically linked to the profit and damage models and with the balance sheet as well. Sales focuses on can be set for specific branch as well as for individual product. Managers can then measure branch performances after analysing variances across every area.
Effect:-
To assess all areas, there was a standard language
Business goals were set by using same metrics which was used to assess performance and budget can be prepared accordingly.
Resources were better allocated consistent with their objectives since professionals were in a position to easily determine what exactly is happening at particular branch.
Why Oracle?
Functionality provided by Oracle's solution and Oracle's previous experience in making use of ERP in other top banking companies.
Solutions provided by Oracle's different modules were appropriate using their company business point of view
Expertise of the implementation team of Oracle, earlier experience, Versatility of the Oracle system, Cost allocation concepts of the lender persuaded IDBI that predicated on their knowledge and skills they need to indulge Oracle again.
Major Accomplishments of Oracle
Due to dedicated resources and useful coordination among the execution team of Oracle, the ambitious project deadlines were achieved and implementation was efficiently completed.
Past Experience also helped Oracle team in implementation anticipated to which trials, integration and data extraction travelled well.
CONCLUSION
Over the years, execution of ERP has helped banking sector in an enormous way. Integration of data has helped finance institutions to analyze financial condition, bill management and also helped in prep of financial accounts and statements. It has additionally provided solution for most things including cash management, cash security, cash accounting and payment processing.
The need of the hour is to perform core bank activities and increase the quality of customer service by integrating its various components and steer clear of data redundancy.
Industries look for ERP solution that can provide a common technology program with functions of inspecting business data. They expect to meet the global business requirements, with simultaneously adhering to the united states specific essentials.
Thus there is a significant improvement in IDBI after new alternatives and restructuring. The lender can now cope with almost 3lakhs transactions. In addition, it helped IDBI to start various services and services. Rate of customer satisfaction also increased. There is a exceptional change in the revenue and the entire profit of the business.
