Banking Trends: Capitalizing on Data-Driven Disruption

– [Christina] Banking Trends for 2018: Capitalizing on Data-Driven Disruption.

Sponsored by Appian, andhosted by American Banker.

I would like to introduceyour moderator for today, and that is Mike Sisk.

Mike, you now have the floor.

– [Mike] Thanks very much, Christina.

And I would like to welcomethe audience once again.

We are very grateful that you have chosen to share some of your busy day with us.

We know that your time is valuable, and we'll honor that withwhat I'm confident is gonna be an enlightening and engaging60 minutes or so of discussion.

Once again, our topic todayis Banking Trends for 2018: Capitalizing on Data-Driven Disruption.

And my name is Michael Sisk.

I will be your Moderator today.

I've been a New York-basedjournalist for about 20 years and I have stints aseditor-at-large at US Banker and contributing editorof Bank Technology News.

My articles have also appearedin American Banker, Barron's, Crain's New York Business,Inc.

, Institutional Investor, strategy+business and Worth, and I am very pleased tointroduce our two speakers today.

First, is Jost Hoppermann.

Jost is the Vice President, Principal Analyst ServingApplication Development and Delivery Professionals at Forrester.

Jost, as an analyst, he is an expert on a number of architectureand technology topics in global banking, such asoff-the-shelf banking platforms including core banking, mobilebanking, online banking, and omnichannel banking, payment and financialrisk management solutions, banking architecture, banking platform transformationarchitecture and strategy.

He also led research into the business and technology aspects of banking in the future forbanking in 2023 and 2030.

And we are very, very pleasedto have Jost with us today, and joining him is MichaelHeffner, Vice President, Global Banking, and CapitalMarkets Lead at Appian.

Mike leads Appian's financialservices practice globally with an industry team thatpartners with FS firms to enable their digital transformations.

Mike brings over 20 years of experience driving innovationapproaches to problem solving within banking and capital markets.

Prior to Appian, he was Managing Director, Business Transformation atState Street Global Markets, and also held management roles at Charles Schwab & Company and Accenture.

Mike holds a BSBA in Economics from the University of South Carolina and MBA from Babson College.

And we are also very, very happy to have Michael with us today.

And just before we jump into the real meat of the discussion, I just wanted to reiterate one thing that Cristina mentioned at the very top, and that is that we do havetime at the end for questions.

Usually, we've got about 10 minutes or so.

10 or 15 minutes perhaps, and.

You do not have to wait to putyour question into the queue.

You can do that throughout thehour as the spirit moves you, and we you know encourage you to do that.

We really want to hear from you.

If we run out of time anddon't get to your question, or sometimes it's just a question that's better addressed one on one, we will definitely follow up afterwards.

As I said: Please ask away.

If you don't hear from usfrom the time we have today, we will definitely be following up, so please do weigh in and Ithink that kind of brings me to the end of my littleopening spiel here.

Let me officially turnthings over to Jost, who will really kind ofget things rolling here.

Jost, please take it away.

– [Jost] Thank you very much.

Looking at the list of participants, I think it's fair to say good morning, good afternoon or good evening.

And in addition to that,thank you very much for Appian because Appian gives me theopportunity to talk a little bit about two of my favorite topics; and this is certainly onone side, digital banking, and on the other side,digital banking trends.

So without further ado, let's talk a little bitabout digital banking and I think one of the key topics when it comes to digitalbanking is certainly that there are so many differentmeanings, understandings, definitions of digital bankingand for the time being, let's have a quick look atwhat digital banking means.

Because I clearly think, I think that digital bankingclearly goes beyond channels and I think this is certainly something that is very important because too many people think channels when they talk digital banking.

What does it mean froma historic perspective? Initially banks, maybe10, 15, 20 years ago, started with the online,the internet channel, and connected the channel toa couple of back-end solutions in some kind of very basic way.

After that, they probablyadded an additional channel, the mobile channel in a very basic way.

Again, maybe text messages SMSdepending on the geography, and after that, they addedadditional capabilities, additional back-end solutionsto create a broader approach toward the online channeland the mobile channel.

And maybe over time theyadded further channels, like the ATM, like IVR,et cetera, et cetera to create a broader digital experience; however, they clearly foundthat adding more and more back-end capabilities fora richer service offering for an improved customer experience certainly created challenges.

Consequently, they had to dosomething to bring channels and back-end solutions together.

This was definitely some pointin time when they needed, they accepted the need for integration: in the early days, maybe a message broker; today, in many cases, this would be in.

This was not all.

Over time, many financialservices firms found that it's not onlyabout isolated channels, they need an omnichannel solution to create a more comprehensive experience and improve customerexperience on one side, on the other side theyneed to make the management of all of the channelsfrom a UI perspective, for example, much more effective than they can do manage this today.

But this is not all,leading banks certainly are also adding channel-specificbusiness capabilities, be it a single view on the customer, in some cases certainly more than overdue, and in some cases they are coming up with very specificanalytical capabilities, going for next best action, going for clear optimization of theoverarching customer experience or for some kind of analysis, which channels are bestsuited for which products, just to offer a few examples.

So, consequently, leading banks consider all the componentsinside of this green box.

They are omnichannel banking solution.

And this is maybe why manypeople say this green box is digital banking; however,this is certainly not the only thing that needsto be done, why that? Because customers expect more.

They expect, for example, thatwhen they deposit some cash in the bank branch, they see this deposit on the deposit's accountusing a mobile device immediately after they leave the branch.

And this is somethingthat many old-fashioned, core banking solutions, many old-fashioned back-endsolutions cannot deliver.

On top of that, such a kind of solution that focuses on the channels only does not deliver the data foundation to create the overarching basis for a great customer experience for a great approach toincrease revenue streams across various channels.

And this is one or two.

These are one or two of thereasons why Forrester says: "We need more.

" We need to arrive at anunderstanding of digital banking that we call true digital banking to indicate the broaderunderstanding here, so that digital banking certainlyneeds a solid foundation of back-end solutionsthat are also able to, to deliver in a flexible fashion in close to real time, saving your time.

And certainly in a way that also offers sound product composition capability.

What does it mean for banks? What does this kind ofapproach mean for things? Let's have a look atdrivers for transformation.

And when we look at these key drivers, we see it clearly, seethat banks need to consider quite a number of activities to cover top transformation drivers.

What do I mean by toptransformation driver? It's basically aboutresults from Forrester's most recent FinancialServices Architecture Survey that showed a strong focuson North America and Europe.

And this survey indicatedthat it is certainly mandatory to create a very engaginggreat customer experience.

But at the same point in time, it's also about improving channel support with some kind of broader approach toward omnichannel banking, but at the same point in time, maybe more in some geographies and others, it's also about innovativeproducts and services, more agility, andcertainly also compliance as regulatory requirements.

A lot of these keytransformation drivers bring us to a number of key topics.

When banks start, whenfinancial services firms, start planning their transformation, they come up with a varietyof different functional areas where they would like tostart their transformation, where they would like toinvest first, so it's.

For our session today, I brought with me the topseven initial focal points for this kind of digital transformation.

And we found that no surprise, omnichannel and crosschannel solutions in the financial servicesspace and banking are certainly very important here.

And the same point in time, it's definitely about analyticsbusiness intelligence.

This kind of key componentthat I mentioned earlier, it's certainly aboutmobile banking, hopefully, as being a part of theomnichannel approach, maybe with a mobile-first approach.

It's definitely also about amodern core banking approach but also about the supporting architecture that allow us to bring allthese different pieces together and that allow us toderive a somewhat managed and certainly smooth migration approach.

I guess this is already indicating that the bandwidth oftransformation programs includes the front and the back end, and also additional capabilities, like, for example, strong analytics and maybe in some cases,even more and, for example, analytics-based on artificialintelligence capabilities.

We'll come back to that in a few seconds, so what does it all mean? These are, until now at least, the descriptions of whatfinancial services firms already determined forthe next, say, 12 months.

They described their majorpains of business drivers for digital transformation, and they also just describedwhere they would like to start their transformational journey.

But what does it mean for the future? Let's have a look.

As a key financial servicesdigital banking trends in 2018 that Forrester has identified, and these trends certainlydo not come out of the blue.

They are clearly related to further trends that emerged early on andthat have accelerated, became stronger over time.

So let's begin with the first.

Let's begin with the firsttrend for 2018 and beyond.

The first one is certainlyabout a new operational model based on open banking, and open banking shouldcertainly leverage API.

When we talk about open banking, we define this as a regimentation of the value chain in banking.

Support by APIs, in this approach certainlydemand collaboration with other banks, FinTechs,other financial services firms that provide complementary products and services and technologies, but it also means to openthe banking environment; for example, to developers, that may create individual applications that offers the bank customersdifferent, and maybe even, improved customer experience.

And what is very importanthere, in some geographies, regulatory pressure iscertainly pushing open banking but I don't believethat this pressure alone will make open banking a reality and many banks are nowincorporating open banking, the business and technology strategies.

And in the same survey, he talked about, I talked about earlier we foundthat larger number of banks already use APIs in a limited fashion, or the broader fashion today.

Don't get me wrong here, just certainly not yet something that the majority of banksglobally do use today, depending on how youcount we arriving at 20, maybe even 30 or 40,000 banksand credit unions globally, so we are talking certainlyabout a way lower number of banks with operational APIs but nevertheless APIs willbecome a mandatory building block of target state architectures.

And to give you oneconcrete example, Santander, for example, made to becoming an open platform for financial services,part of its global strategy, and describe this approachwithin its investor reports.

What does it mean from a technology side? From an impact perspective? You believe certain that certainly, APIs are the key building block.

You can already guess itbased on my introduction.

And these APIs are certainlymeant to create an environment that will allow financialservices firms banks to become both more flexible internally, because you can also use APIs internally, and to drive revenue eithervia, for example, micro revenues with developer models orby creating ecosystems with corporate customersand other partners.

And there's certainlynothing absolutely new.

Banks are already working on that, whether it's a bank in Europe, BBVA, whether it's a bank inthe US, Capital One, or whether it's a bank in Asia, say TBS.

We are seeing this around the world but the same point in time, the emerging specifications for APIs allow us to do more withAPIs than say 10 years ago.

And please don't get me wrong here, I deliberately avoided the word standards because I do not yet see standardsin the banking API space.

I see a number of activities and projects that are the candidatesto deliver standards at some point in futurebut they are not yet of the existing specifications today, are not yet sufficientlyrich, sufficiently broad, and they're certainly not yet standards.

Let's move to the next topic about revitalization of touchpoints.

And what we are seeinghere is that banks have virtually related, sorry,neglected customer relationships in their most popular touchpoints, for example mobile online banking, because they focus toomuch on transactions.

And these applications work very nicely when it comes to transactions.

But many banks put a toostrong focus on channels, and consequently banks needto revitalize touchpoints to re-engage with their customers, even via digital channels.

So at the same time, banks cannot afford to hire necessary staff todrive these relationships, via one-to-one online chat for example, or call center interactionsat a given point in time within a necessarysituation, so, consequently, they need to focus on digitalcustomer relationships that require fewer staff, andagain to give you an example, (mumbles) experimenting withcombining the data and AI to deliver a great call center interaction without much human involvement, and what I heard until now,they are pretty happy with that.

What does it mean from atechnology impact perspective? You believe that you need todesign for intelligent channels and so it's certainly aboutleveraging AI machine learning, natural language recognition, like natural language generation, but to create more automaticand more intimate engagements.

But at the same point in time,it's also about, for example, multimodal omnichannel as in combining various physical channels, like video, like co-browsing, like chat, into a single much more powerful channel.

And this is certainly a great way to move into this direction, and at the same time, we are seeing that socialnetwork integration is certainly somethingthat many things pursue, but it's not yet 100%.

The mainstream capabilitythe MiFID applications and augmented reality arecertainly at this point in time, channels, additional touchpoints that do represent a relativelylow priority on many things.

Though, it's really aboutcombining these channels in innovative ways to createmore engaging touchpoints.

With that, let's move to the next topic.

This is certainly aboutembracing analytics, leveraging data for true digital banking.

And this is certainly about.

One of the foundations, I mentioned this earlier,of true digital banking.

And it's about buildingsolutions that respond to, do not only respond toinformation requests in your time but it's also aboutanalyzing customer behavior, products and service,and risk automatically when handling customer interactions.

And I think this is very important because this will createa much more, let's say, individual perception ofa given digital channel, then it is possible, formany banks at least today.

To give you one example, one bank in the US is using analytics, in this case without AI, to better understand customer preferences, online in close to realtime, maybe even real time, and deliver tailored offers and services.

This certainly means it's aboutdriving true digital banking with a FounData foundation that helps us to create an agile intelligentinteraction with customers.

And one of the toolsto do so is, certainly, again something from the AIspace robotic process automation but there are also other capabilities that who can be used in this space.

And certainly.

Banks need to be awarethat they need to combine with data business and risk analytics to basically harvest a fullpotential of digital banking.

With that, let's moveto trend number four.

We believe that it's not only about creating newand innovative products, it's also about creatingmore efficient products despite marketplace complexity.

What do I mean by that? We found that many banks today work with many unprofitableproducts and services and they have to faceregulatory pressures, say many products have apoor cost/income ratio.

And in some regions,for example in Europe, there are certainly challenges,like low interest fees and interest fee margins.

And in the FinancialServices Architecture Survey I mentioned earlier, Forrester found that 80 (stammering) sorry, 38% of financial services firms consider product and service innovation a key driver for change.

But at the same point in time, bank executives alsoidentified that this is, this topic is much more relevant for specific groups, likehigh net worth individuals, so it will most likely beabout product rationalization for the lower part of the customer pyramid and definitely very individualvery, very customized product for the more interesting customers.

Down to the market of one.

But at the same time, in all part of the customer pyramids, efficiency will become evenmore essential to contain cost.

And so it's really abouttopics that are related to certain tools that many banksdo not have in place today, so what we are saying is banks need to go for more modern productdesigners that help to design flexible products aligned with certain target audiences.

Maybe an umbrella configurator, an umbrella product designer that helps to cover multiple independentback-end capabilities and certainly banks need to focus more on product calculation.

'Cause you find that manybanks do not have a great grasp of the real cost of bankingproduct and services today.

Consequently, there's abroad range of capabilities that banks will need to workon if they want to compete with their leading peersin any given country.

Just to mention that, given that we have arelatively mixed audience when it comes to regions.

This trend, particular, when it comes to efficiency not so much when it comesto product innovation is certainly a little bitmore visible in Europe where we have too many products; while banks in North America clearly see they also need tofocus on (speaker distorted).

And last but not least.

(cough) sorry.

Last but not least, you clearly have oneadditional topic here.

This is definitely differentiation with convenient security.

And some banks certainly view security as an unwelcome cost of doing business; however, the growing risk ofinternal and external threats to both the business andthe bank's reputation make security increasingly important.

And just to give you one example, in Forrester's FinancialServices Architecture Survey, we found that 52% offinancial services firms perceived security the number one obstacle for software-as-a-service deployment.

I'm not sure this isn't, this is true.

It's probably more, definitelymore, on the perception side but I think it's a veryinteresting number.

At the same time, banks certainlyneed to balance the need for strong securityagainst business agility, and the ease of use for customers.

So it's again about greatcustomer experience.

And consequently what weneed is a much stronger focus on highly convenientbiometric security mechanisms that won't hopefully be circumvented by alternative four-digitlog-in approaches for mobile banking, to use one.

With that, I think, I tried to cover the five key trends for 2018in comparably short time, and I hope this was interesting for you.

As I mentioned earlier we arehappy to discuss these topics and all the other topics thatwe will discuss today later on though, I guess whatremains to be said is, keep in mind that there'sdefinitely the need to accept true digital transformation as in a change of theapplication landscape in banking that does not only focus on the front end but also embraces all kindof back-end capabilities to create the bestpossible custom experience and to drive revenue.

With that, thank you very muchfor your interest until now.

And with that, I thinkover to you Michael.

– [Michael] Fantastic,thank you so much, Jost.

Before I get started, letme express my gratitude to American Banker and Forrester, and in particular Mike, Jost and Christina for what's already shapingup to be a great webinar.

My name is Mike Heffner.

I'm gonna take what Jost has teed up here in his research-driven deep understanding of what's happening in banking globally, and I will add what I would think of as, more of a practical perspectiveof those five key trends that we just heard about.

So really it's about howdo we make that real? How do we get there? So I'll cover off around the five trends that Jost had focused on around API, so I'll talk a littlebit about enablers of API but some of the challenges as well.

Channels.

I'll talk a little bit aboutvalue creation and channels, and this idea of true digital banking.

we couldn't agree more thatthat's where the next is and that's where the truevalue generation for customers is gonna come from; that'salso where the efficiencies and the better response to GRC challenges is going to come from as well.

I'll talk a little bitthrough data and about data.

I think data is absolutely the cornerstone to any of the transformativethings we're contemplating for next year and beyond, and ultimately, it's themechanism for our customers in the industry to create uniqueness.

We believe firmly and ourcustomers believe firmly that in order to compete, it's about creating your ownunique identity and voice, and then have the abilityto actually execute against the vision, somore to come on that.

I'll talk a little bitabout innovation as well, and what we're seeing as thecornerstones of innovation around making it real but thenalso creating feedback loops that allow our customers tovery, very quickly adjust and be nimble as they'recontemplating the future from a product and service perspective.

And then ultimately, I lovethe example of biometric but let's be honest it'sreally about future-proofing.

How do you protect theinvestments that you're making now so they're relevant in the future? I'm not going to talk alot about Appian itself.

I will introduce a coupleof ideas around Appian.

Ultimately, what I'm talking about is how do we enable this futureand modern platform tools such as Appian I think areextremely well positioned to help make that future come about.

So what that said, let'sfocus on, how do we get there? Let's start with this idea of API banking.

I think in certain regions ofthe world we're a bit closer than others, certainly PSD2in Europe, is a great driver.

Ultimately, we agree with Jost, and generally in engagingwith our customers on their digital transformation agendas.

We agree that directionallythis is where things are going.

It was great actually to hear Jost mention some of our customers earlierin the earlier segment.

I think ultimately modernplatforms, like Appian's, enabled a shift to APIbut here are the cautions.

Right, the cautions are,that for the most part, we're not bankers, banks,or not in a position where we are given thelatitude to start greenfield.

And even in those examples, we do have a couple exampleswhere customers have stood up greenfield businesses from scratch even then they still haveto integrate with legacy.

So the idea is how dowe innovate around API? How do we create these ecosystems that are all about valueand self-sustaining? But let's be completely pragmatic that banking is a regulatedindustry and should be and therefore we haveunique responsibilities to the countries, the businesses, the environments that we operate into, and to be able to control thoseenvironments that we create that include potentiallyAPI-based solutions.

The other reality here is that, the pragmatic check here is that as you're creating value via open API, banking.

You're still responsible for understanding the end-to-endtransaction life cycles.

And that requires awhole lot of integration between the new and the old, so how do you get there? How do you create this integrationlayer that really focuses on holistically understanding transactions as they traverse your bankand assure accountability.

The other piece here, Jostmentioned this earlier, APIs are externally facingbut also internally facing, but the reality is most bankshave been built over decades and really include a mix of technologies.

There's plenty COBOL still around.

A mix of technologies that also are vended that are less, less, less modern, so how do you deal with that? How do you still create the accountability for an end-to-end transaction yet deal with a mix of technology, some modern, some not modern.

We think it's a greatcombination for Appian to own the end-to-endtransactional life cycle and then some othertechnologies, like RPA, to come into play to begin to automate and integrate some of that last mile to some of those moreblack-box legacy technologies which are also over timegoing to get rewritten into a more modern standard.

So lots of opportunity in the ROI space, modern technologies,achieving ROI out of API, modern technologiesenable that transition, enable the shift towardsAPI-based banking, by combining old and new but doing so in a controlled environment.

So switching gears just a little bit here towards this idea of intelligent channels, and I love Jost's graphic earlier.

We completely agree.

It's about front to back.

It's no longer abouthaving a nice front end.

I think that was the gut instinct, mobile enable desktop enable.

It's really about how doyou create a single view? How do you aggregate information that exists inside andoutside of the organization in the full ecosystem.

Visibility and traceability and accountability fortransactions gets a lot harder when you start having to engage on not just your customerbut customer's customer and really understandthe full value chain.

This is, we completelyagree as the true definition of digital banking, it's anintegration of front to back.

It's not just purely saying, we have to go completelypaperless for example.

I often hear this, isn't digital transformationjust going paperless? It kind of is but, again, being completely pragmatic in certain jurisdictions,which are certain products, you're still going to dealwith the legal requirements that come along with withmaintaining documents, and what signatures for example.

So really true digital transformation is about the joiningtogether paper and digital in such a way that digital ishighly efficient and effective and you're not slowing down rather you're integrating with legacy, so you can control thetransaction life cycle.

This is the lifeblood:Data is the lifeblood.

it's interesting, we werejust at Sibos in Toronto just short while ago,and always a great forum.

So many bankers globally coming together to talk about what's next,and what emerged was the steam that we're all worried aboutdigital transformation, how to get there, butuniversally we all agree that data is the lifebloodof that transformation.

But it's not just data,there's lots of raw data that exists in lots of different places.

It's about how to joindata insight and action into something that's meaningful.

Jost talked about earlierthis idea of harvesting value, this idea of how do you create offers around next best action? How do you create education for yourcontact center workforce, so they understand the appropriate next steps to take? So it's a very complicated environment.

ultimately, while we starttalking about new technologies, like AI and machine learning, and certainly big datais a big part of this, the part that often getsoverlooked is action.

We think being able to.

in one platform, joindata inside then action and being able to executeand offer guidance in the moment, which isreally all that matters, 'cause that's where it's most important, that's where you havethose moments of truth, is enabled via modern platform technology.

So this is incredibly important from an enabling perspective.

One aspect that we're seeing is the definition of data is changing.

It's no longer aboutthe data that may exist in the four walls of the bank, it's now about the data that exists with the entire ecosystem ofservice providers and partners but then also the data thatexists in the universe itself, so we have customersthat are bringing into, for example creditdecisions, data from social, so how do you integrate all that, and then again how do you drive insight and get to action allin the same platform, which is really what we thinkis innovative and different and gets to harvesting value.

And AI may not be part ofthat right from the get-go, it may take a while to get to AI but how do you create afoundation for all of that and begin the future-proof now.

This idea of innovation is interesting.

We just hosted a conference globally with some amazing speakers.

The theme of innovation kept coming up, and what I found reallyinteresting is the shift from.

We used to always talk about fail fast, so now it's shifting tolearn fast, spend small, and we couldn't agree more, but innovation has to also be practical, it's gotta be real.

I love Jost's comment aroundunderstanding real costs, being able to articulate thecost of an entire value chain including integration withlegacy is incredibly important, so we have customers that are leveraging our low-code rapiddevelopment capabilities that really enable business visionaries to partner shoulder-to-shoulder with IT and very rapidly createsolutions and products that are real world.

And real world means they integrate back with the legacy environment.

Creating something on an island doesn't really begin tonote the real challenges that come with beingin a regulated industry and then ultimately having to ensure that anything you put out there has visibility, accountability,traceability back.

We're extremely excitedabout what's happening around innovation andrapid innovation right now.

We have customers, I'm thinking of one particularcustomer in the Netherlands, who is literally standingup a digital bank with a team of less than five folks and they're rapidly creating experiences.

The idea of innovation and immediately seeingsomething come to life and then being able tointegrate real life data and then being able to adjust and adapt to what you're learning backto this idea of learn fast is I think where all of this is going, so real prototyping ina low-code environment where the technology isno longer an impedance.

The technology is an enabler but for banks it needs to be real and in order to make itreal it needs to integrate with the legacy environment.

I'm having a lot of fun rightnow with my brand new iPhone and Face ID, which is fantastic.

Jost talked about biometrics.

It's the latest whizbang gadget.

I'm completely excited about it.

My son is probably moreexcited about it than I am.

I see him playing with it quite a bit.

But, ultimately, the message here is.

You can't just future-prooffor what's next, you have to future-proof forwhat's next next next next.

And we don't know! Modern technology platforms allow you to not box yourself in.

Modern technology platforms actually allow you to adapt very quickly without having to rebuildyour existing architecture and that's certainly truefor biometric things, like Face ID, but it's also true for this core processbanking capabilities as well.

It's ultimately aboutfuture-proofing your investment, so you're not ripping, replacing, and starting over everytime something new surfaces.

I said I wasn't gonnatalk about Appian a lot.

This is the sort of a main Appian slide I was gonna talk a little bit about what we're seeing aroundtrue digital banking and each one of these customersis doing work in that space.

Ultimately, we're seeing engagement with ourmodern technology platform in banking around three major domains: One is this idea of truedigital banking integrating omni but also integrating, truly integrating front, middle, and back, so that transactional life cycle, creating visibility and accountability, integrating technologies,like RPA, like AI, but still maintaining visibilityand control end-to-end for a transaction lifecycleas it traverses the bank, so those transaction lifecycle use cases are front and center with our customers what hasn't gone away and isn't going away is how do we become more efficient? How do we eliminate some of the things that are happening dueto our legacy environment where we still have our internal agents, and in some cases customers, dealing with dozens of different systems in order to achieve a single outcome? How do you aggregate? How do you create a digital overlay? How do you get exposure to one interface that allows, the customer allows the servicing agent toexecute a transaction much, much more efficiently with higher precision position as well, so lots of those use casesand they're very compelling.

And then third, GRC it's notgoing away, but I think.

The mandates around GRC are changing where it's becoming much more holistic.

It's less siloed than it used to be, so it's more aboutunderstanding your customers and their customers and the full ecosystem of service providers, understanding what productsand services are consuming and what are they doing withthose products and services and being able tounderstand that holistically and act and monitor andaction against issues is where GRC is going.

We're clearly helping.

Transaction lifecycle, efficiency, and GRC continue to be major themes and we're lucky enoughto have great references across the spectrum of bankingand capital markets globally.

I would like to sort ofecho Jost's last point, which is you know we're here now, this is real.

If you're already engaging, that's great.

I see a couple of our customers are actually on this webinar.

I'm excited to see that as well.

If you're still on the sidelines wondering if this is this is real, it is, so I would echo Jost's point, engage now.

We're ready to work with you.

We're excited to hear about your unique strategy.

how are you going to achieveuniqueness in this industry and we're standing at the ready to help and we're very much aligned with the future trends around 2018 and beyond.

With that, I'm gonna hand it to Mike, I believe, who's going to surface a couple questionswe've already gotten.

– [Mike] Indeed, indeed, I am.

Thank you very much Mike, and we've got about 10 minutes, and that's good, that'sgood amount of time.

We've got a couple goodquestions in the queue, and just reminding everyone that you've got somethingthat's on your mind, now would be definitely the time to pop it into the queue for us.

Let's kick things off with this question: How will digitaltransformation enable my banks to become more efficient and agile? – [Jost] Michael, wouldyou like to give it a start or should I go? – [Michael] I'd love, I'dlove to give it a start.

I think we have to be pragmatic here.

I think the reality is that, our banking architectures are complex.

There's a lot of legacy.

However, banks don't have thelatitude, in the most part, to build the ROIs and business cases to just start from scratch; that's just a highly unusual use case.

We have to deal with it.

Ultimately, when you look at where non value-added activities, so inefficient activitieslived within banks, those non value-added activities tend to be at those transition spaces where I'm working in aprocess or a transaction and I have to log onto 17systems to get anything done all of those logons, all of those interactionsare complete non-value-added.

So being able to eliminate those, I think, is hitting on the multiple objectives.

It certainly makesprocesses more efficient but focuses on where istheir actual value creation.

But it also makes them more.

Less prone to error and risk.

– [Mike] Jost, you wantto add some thoughts? – [Jost] Yes, thank you.

My view is that digital transformation is simply a tool to become exactly what the question's asking about, the tool for a bank to becomemore efficient and agile.

Why that? I've already mentioned the COBOL systems, the fragmented landscape and banking as far as implications are concerned.

And when we used to look at typical digitaltransformation initiatives, we certainly find that, at least when it comes toexposing internal capabilities to the outside world,whether it is via channels or channels combined intogreater customer touchpoints, this comes with some restructuring of the overarchingarchitecture of a given bank 'cause you need at leastintegration points, maybe and hopefully, abank comes up with APIs that can be consumed by the outside world, whether it's a web APIor B2B API or something.

Digital transformation comes with certain architectural artifacts that help to become more agile.

We also touched adifferent topic earlier on in both parts of our presentations.

In both our presentations saying, it's not only about making capabilities available to the outside world, it's also about changing the way how capabilities are delivered internally.

What I'm seeing in many banks at this digital transformation process also breaks open.

Let's use Michael's examples,the COBOL silos, so that, and maybe, does not necessarily, replace these silos immediately but adds additional capabilities so that we have a more decoupled and more cohesive application landscape that allows for faster, more agile supportof business change.

And I think this is exactly where digital transformationcomes into play.

Particularly if a bank or another company understands digital transformation in the way of true digital, as in embracing thefront and the back end, I think this is exactlywhere the value comes in.

And this is also why Forrester suggests to move to target state architecture that we call digital core banking as opposed to traditional core banking.

– [Mike] Interesting, interesting.

Thank you both.

Right, all right, let's see.

The next question here.

Also just talks about toboth you guys to weigh in on.

Let's see, typical organizations spend a majority of their IT budget maintaining existing systems.

That leaves limited resourcesavailable for innovation, what would you recommend as a strategic directionto help solve this? – [Michael] Yeah, hey it's Mike.

Absolutely, I mean, thisis not a new problem.

We've been talking aboutsort of 80%-20% for a while.

I think, based on what I'm seeing, I don't have any hard data on this, I wouldn't be surprised ifit's more like 90 versus 10%; so 90% going towards spendingjust to keep the lights on, and 10% around innovation.

I think this is where the reality sets in around what's happening in a macro level, macro level, within technology.

The truth is that we are seeing uniqueness and differentiation more and more coming through software.

You know the phrase,software is eating the world, has been around for a while but I think we're actuallyseeing it now more than ever, is for companies,whether they're banks or, manufacturers or, the chain of coffee shops for those entities to create uniqueness in their business model and how they createexperiences for their customers and how they compete on value in how they compete on theirarchitecture requires software.

The building and maintaining of software.

Yet at a macro level,the number of developers that are entering the workforceis staying relatively flat, so you have a disconnect.

You've got a hockey stick pattern around the development ofapplications and software yet you have a flatsupply of the traditional craftsmen and women thatwould create that software.

This is where low-code comes into play.

This is where this idea of rapidly developingsoftware applications with low-code, reusable, quick to assemble, quick to change softwarewill make all the difference.

– [Jost] And maybe to addone or two aspects here.

We also have to look at thedevelopment of banking software, particularly in the off-the-shelf space and if we look back sayfive or six or seven years many banking software vendorspromised a lot of agility, a lot of ability to reducethe maintenance share of this, 7o to 30 or 90 to 10 ratioMichael mentioned earlier.

It certainly depends on the bank, but it could reduce themaintenance share here.

However in the days theypromised this by saying: "Hey, we have components "and you can flexiblycombine these components.

"You can replace existingbusiness capabilities.

"You can reduce maintenance," and most vendors most off-the-shelfbanking software vendors did not fully live up to that promise because many of them simplyrenamed existing modules that, hey we now have a component.

And this is certainly not the way to go.

However now situation has changed, and I think what we areseeing today is that both, in this case, bothin the off-the-shelf world, as in off-the-shelfbanking software vendors, and the custom-build world, more and more firms, banks and vendors, accepting that they needto focus on micro services to create a much more, let's say, easy to build and easy to deploy and easy to change environment that allows them tosupport the rapid change that the banking industry.

– [Mike] Excellent, excellent.

Thank you both again.

Let's see here we are getting very close to the top of the hour here, but I think we have timefor one more question.

Let me throw this one at you gentlemen: Does Appian offer a frauddetection risk management platform as part of your offering, is it machine learning-basedor rules-based? I guess that's mostly a question for Mike.

– [Michael] Yeah, happy to answer that.

That's a great question.

We absolutely.

As part of our platform, and customers are leveragingthe Appian platform this way, are managing complex fraud, AML cases by Appian.

We have the ability tointegrate machine learning.

We're having lots of great discussions around that topic with customers.

Customers haven't gone live yet.

It's not a technology constraint.

I think it's more of abusiness policy constraint.

I think there's still a bit of, and this will likely go away over time, but a little bit of a ongoing concern withinthe banking industry around who's checking the checker, right? How do we ensure that models don't go off the rails? But for us, our sweetspot, our core strength is the ability to effectively case manage fraud and then not only manage those events to conclusion within regulatory windows,et cetera, et cetera, but then also feed what we'relearning about false positives back into the detection mechanisms.

It's an interesting evolving space.

AI will be part of it, and we're having those discussions.

It's not right now.

– [Mike] Excellent, excellent.

Thank you, thank you Mike.

And I think that is aperfect note to end on.

We're right, I've got rightat the top of the hour here and we do love to be punctual, respecting everyone's busy days.

But let me thank Jost andMike for a great hour.

Really, a really robust sessionwith lots of great content and lots of great questionsfrom the audience.

Thank you everyone forputting those questions in and being here today with us.

Please also everyone that's with us, keep an eye out in your inbox because we're gonna besending you a follow-up email the next day or two that we'll have a link to the recording of this session as well as a PDF version of the slides, so you can sort of, you'll have that whole package to review.

In the future at your leisure, we encourage you to do that, there's a lot of good content here.

And with that, I will wrap it up.

Wish everyone a wonderful rest of the day, and I hope you'll joinus again here very soon.

Thanks so much.

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