Overcoming the Digital Lag MKB Bank

Customers are changing Change and transformation projects are not undertaken just for their own sake, they are driven by internal and external factors For us, and I daresay for the whole industry, customer and their needs are changing so rapidly, that the challenge is upon us to keep up with the pace of change

Teljesen papír alapú ügyintézés, kevés pénzügyi termék, egyszerű műveletek esetén is akár órás folyamatok 1965 1975 1985 2005 NOW

Then the seventies came and people started to become more smarter about their finances – although maybe not yet about how they dressed as you can tell from this picture 1965 1975 1985 2005 NOW

A 80-90es évek a mobil telefonok térnyeréseével teljesen új horizontokat nyitott a technológia, a pénzügyi szolgáltatások és gyakorlatilag az összes iparág fejlődésében. 1965 1975 1985 2005 NOW

Az ezredfordulóval teljesen új kiszolgálási modellek jelentek meg. 1965 1975 1985 2005 NOW

És napjainkban az információ áramlás gyorsasága gyakorlatilg megváltoztatta az élet ritmusát, egyfolytában online vagyunk, és complicált, nem átlátható, nem hatékony folyamatokat már nem tudunk tolerálni. Minden azonnal és ott helyben kell …. 1965 1975 1985 2005 NOW

Customers are changing 2015 NOW 2020 Customers are changing 10 Mio people 10 Mio bank accounts 12 Mio mobile phones Digital banking functions MKB Bank 1800 100% 100% 1200 50% 0% Internet Penetration Hungary, 2007-2016, 16-74 years Branch numbers Internet bank users A fogasztó szokások általakulsá jól látszik pl. azon, hogy a a bankfiókok száma 25%al csökkent az elmúlt 9 évben. 10 mio accounts (retail &wholesale) and 80% of them has internetbank account Internet / Mobile penetration up: there are 12 million mobile subscribers in Hungary, while the total population is 10 Mio; 5,4 Mio persons are using internet regularly, penetration of internet is 64,4%, 4,9 Mio out of it primarly uses desktop, but the younger generation is using mobile devices (3,5 Mio) Banking functions on digital up Hungary, 2007-2016 Hungary, 2010-2016

Fear of strategic shift to overcome For MKB, as I have detailed we have a long history, which does not neccessarily predestine us to become the most reocgnized digital bank of the region. And yet, when a strategic shit means: Acquiring yet untapped markets An unserved and/or unsatisfied customer base Potentially at a lower overall channel cost It’s almost a no brainer that you have to make the jump. And yet still, it is not a given that an organization can do this. You need a lot of elements to come together, and for us, it has: Committed and young managements Owners willing to make a strategic shift An organization waiting to make a change

Disrupt legacy BPR concept to increase effectiveness Minimize We significantly minimalized the customization Legacy system IRM Industry reference model In order to achieve a full transformation, you can’t just hack away at your core system … you have to precede it with a review of your processes and your product portfolio. SO let me elaborate on this step a little because it was a key element of our trnasformation. We wanted faster and cost effective processes A separate team (with one of the BigFour advisors) started to work on ideal processes, without even knowing which core banking system will we choose. They prepared a concept design After that they analyzed the core banking system capabilities, whether they support it. It was not surprising that the answer was yes. Usually these systems are built using industry references. So, we knew that we should avoid customizations in the system, and stick to the built in processes as much as possible This approach was really important, because we could keep in hands our project budget, and decrease implementation time significantly During composing the BPR team we tried to get as many people from internal staff, as we could. Because we wanted to build champions, without them you can’t achive changes

Strength of Vision 2 1 3 Cultural change TOP 1 FinTech How 2 Cultural change to suit innovation Strength of Vision TOP 1 Digital bank 1 3 FinTech partner bank A célunk, hogy a Top 1 digitális bankká váljunk, - ami a múltat ismerve nem egy egyszerű feladat. Ez a cél önmagában kikényszeríti a bank átalakulását, mind stratégiailag, mind vállalati kúltúra terén. És ez a vízió magában foglalja az IT architektúra átalakítását, új működési modellek, és partneri kapcsolatok meghonosítását.

inside the organization C-Suite Involvement 1 Do it with LOVE! Strong control 5 2 Senior Buy-in 4 3 Quality control inside the organization Clear communication

Building Champions 1 2 3 Structured Sense Empowered employees Project team Building Champions 2 Sense of urgency 3 Empowered employees Authorize, Empower and Communicate To really change people, you need to make sure they feel that they can change things Our people now make decisions in structured format because they are authorized to do that They no longer wait and see, they decide and coordinate And we make sure we communicate at every step of the way

Where do we stand? Go live Migration Unit End user Production 2017 summer Migration test rounds Unit testing End user training Production environment Interface developments Specifications Gap analysis Core system customization UAT BPR Concept design As I said, at MKB, management is neck deep in the project, so I personally am there every step of the way What have we achieved? BPR with a TO BE vision of our processes accepted by organization BY THEN – All customizations received and in process of testing, with over 50% achieved BY THEN – All interfaces developed and almost finished testing BY THEN – Migration nearly complete Last steps are ahead us– final E2E UAT set up to complete Expected go live in the summer

Project in numbers 35 64% 500 Retail Wholesale customers Special 322 employees 35 Systems will be connected We have to migrate 1 000 000 entities 143 FTE in total More than 500 interfaces Retail, wholesale customers, trustees, etc. Currently 322 employees are working on the project with different allocations, this is 143 FTE in total Around 35 systems should be connected to our core banking system and there more than 500 interfaces We have to migrate around 1 Mio entities (retail, wholesale customers, trustees etc.) Around 400 products should be parametrized There are 8300 data fields to be mapped before migration

Architectural Revamp Card System Legacy system DWH Securities System A célunk nem kevesebb volt, mint hogy a leggyorsabb sikeres implementációt tudhassuk magukénak, jelentősen csökkenő IT üzemeltetési költségek mellett. A transformáció álltal csökken Az ügyfél kiszolgálás során használt rendszerek száma, Az egyedi fejelsztések aránya a core banki rendszerben A project során próbáltuk minimalizálni: A satelit rendszerek fejlesztési igényei És az adattárház fejlesztések számossága

FLEX CUBE Legacy system Architectural revamp Card System how does flex work Adapter FLEX CUBE Legacy system Securities System DWH Ahhoz hogy ezt elérjük: Számos legacy rendszer funkcionalitását a flexcube dobozos funkcionalitására cseréltük. core banking system, hitel folyósíás, közös ügyféltörzs) Egyedi fejlesztések számát minimalizáltuk (80% percent of them were regulatory requirements) Introduced ESB as a middleware where the transformation and enrichment of interfaces is executed, so we could avoid developments in satellite ú Use the similar formats for DWH extraction files, To avoid developments on satellite sys side we decided to use built in webservices of Flex and translated them to the format required by satellites. We have done this in our middleware.

C U S Customer focus T O M E R Internal benefits External benefits Internal and External customers T O M E R Internal benefits External benefits Faster processes Personal loans in 30 minutes Faster workflows Mortgage loans in 7 days Digital platforms After go live the entire personal loan process will take 30 minutes The mortgage loan process will take less than 2 weeks Customer opening will be less than 30 minutes Opening new account with 1 click With the capabilities of Flex we will be able to put all types of loans into Flex, so after this we can integrate them easily with our digital channels.

IT Architecture vision Foundational “business as ususal” Modern World MKB IT Architecture vision Foundational “business as ususal” ArkSys Modern “supporters” Retail API WS MQ Fintech apps Middleware A ESB bevezetésével, a midleware stratégiánk megvalósítása mellett a PSD2 elvrásaink megfelelően egy OPEN API architektúrát és ehhez kapcsolódó működési töb sebességes collaborative működési modellt vezetünk be, mely álltal külső innovatív megoldásokat plug&play módon integrál, és a belső innovációt is jelentősenfelgyorsít. Innovation Differentiatior Core

Where are we now? 6 Fintech incubation & Innovation Lab 6 MKB owned Fintech investments under development. Worldwide scale Sandbox We shake the Hungarian Fintech community 1st in Hungary Erre megújuló architektúrára épül rá a több lépcsős fintech programunk, Melynek első fázisa a tavaly lezárult fintech akadémia volt. Ezt követte a fintech verseny, Melyben sikeres pályázók már a fintech inkubétor programunkban valósíthatják meg ötleteiket az MKB bank szakmai, és befektetői oldali támogatásával. We are working on the 1st market launch We are working with foreign team 2nd in Europe with the other mates together

Fintech Vision 10+ From partnership to Go-to-Market 1st open innovation platform in Hungary At least 10 new Fintech investments in 2018 2017 Q4 By 2018 Regional batch