Importance of ERP in the Banking Sector

Importance of ERP in the swearing Sector pious platitudeing diligence has progressed greatly and still growing exponenti eithery covering entire range of transactions and products under far-flung umbrella. When all such activities be carried out by a rim, it is known as Core hopeing. new(prenominal)wise main reasons apart from financial drivers, for opting for core edgeing musical arrangement ar Globalization, booming IT industry and consolidation of industries. at present banking sector is feeling limited of their present systems due to consolidation of industries and continuous increasing demand from customers as well as data management pressure. Therefore most of the banks are focussing on offset rather than cost reduction.Benefits and Prospects of ERP for cashboxing IndustryBanking Sector has huge potential for applications of ERP due to its vast data oriented nature. ERP offers extensive integration among mingled modules. It integrates information, users and diver s(a) processes for better productivity.It supports in decision making which includes decision for strategic, tactical and operational planning and uses various technologies which help in saving cadence, reducing cost, and effective communication.It provides declaration for various things which include cash accounting, payment bear on, security of cash and cash management. ERP systems too help in analysing financial condition of an enterprise, account management and preparation of financial reports and statements.All the back office systems and financial system buns be integrated utilize ERP systems. Helps in effective cash flow by simplifying affect of outgoing and incoming payments.It also offers facility for sharing various processes of banks with customers, vendors and partners. Reporting, planning and analysis of bank assets are combined in one process, and everything is available on single platform.Provides tools which monitor every transaction in real quantify and oth er classical range of service.An ERP system is also responsible for strengthening the logistical capability which includes handling of non-banking goods and services and handling of bank notes.MEETING TODAYS CHALLENGESBanking sector is facing tougher competition and demands fast change. Moreover regulatory and legal requirements want information to be accurate and most important of all, it should be timely. Transparency is also a common requirement. Successful banks are more(prenominal) flexible and effective in this aspect. They have boosted the profitability of their banks and controlled their costs even in such environment. In roam to achieve the goals banks should rate an IT investment so that they can provide fast return and also reduce the heavy operate costs.At present banks have following needsIT structures should be flexible and allow speedy adjustments in the furrow procedures.Efficient vocation procedures and IT structures that are comparatively less complexEmplo yees should be in a position to access tools, solutions and personalized data at any time and from anywhereCore engineering should not be harmed while integrating new processes and functions. integrating should be easy and simple.In order to meet all the demands and change magnitude the transparency level, ERP should increase the efficiency and moreover it should improve the Integrations between the living engine room and various business processes. ERP solutions should also provide a secure access and definitely it should be readily available to all the people from organizations and also to the partner, customer and the vendor.Cash ManagementTeller operationsPosition ManagementTechnical architectureOpen source softwareCASE STUDY-IDBI BANKIDBI Bank was established in 1964 by the Government of India. IDBI became commercial bank in 2004 with a network of more than 700 branches and approximately 1200 ATMsIDBI AND CORE BANKINGAfter the drastic change in top management in January 200 1, the bank felt a need to improve the technology platform so that bank can interpret itself in order to fulfil the challenges in the future. Inadequate network forced IDBI to adopt a technology platform which enabled IDBI to communicate with its customers with the help of umteen delivery channels. Scalability Complete integrated solution was the need of the hour. IDBI ab initio used centrally system from Kindle but it was proving to be inefficient to meet new objectives, so it was changed.Pre-requisite of IDBI- Agility of the Business and Time to marketIDBI required a system that would provide bank the flexibility apart from quick and easy solution to launch various products easily. They required the solution that gave them a time to market and which can provide faster core banking solution. Key driver for the bank was to achieve business agility which was technology driven.Choosing a Vendor-Solution Overview (Deployment Architecture- Appendix fig 2)Finacle by Infosys was fina lly positioned after a tiny evolution of different solutions. It was deployed for corporate and retail banking, e-business and consumer operations.Another important point in IDBIs successful carrying into action was the time passn for implementation. It was through crosswise entire bank in a record time of five and half months.This gave IDBI critical time to market advantage which they badly needed and moreover they were in a position to roll out products at a much faster rate than before. kindred for e.g. Welcome Kit was introduced-concept consisting of the deliverables that customers generally expect on day 1 which includes cheque book and auditory sensation banking and e-banking details. This reduced the time employn to open an account which initially took at least 6-7 days.Advantages of Finacle (Functional Architecture- Appendix fig. 3) main differentiator was latest technology. Various types including straight through processing, 24*7 banking, E-Xtensibility tool kit wer e deployed by Finacle. With the help of Finacle which proved to be a right choice IDBI brought down their End of Day processing time by more than 79%.After Implementation of FinacleCapabilty of handling 3 lakhs transactions in a day from 8 lakhs customer accountsIDBI became 3rd largest pvt.bank in terms of distribution of branch networks. sell banking sector of IDBI has grown to many folds after deployment of Finacle. It also helped in rolling out of new products and services quickly. New products include the debit cards, gift cards and family accounts.Finacle offers customers a unified view of their relationship with bank which helps in achieving customer satisfaction.Helped in process centralisation.Challenges faced by the VendorTo cope up with the energising and ever-changing business processes and consumer needsTo be in-line with the regulatory guidelinesTo assist the banking service with regular up gradation.Integration with Legacy administrationsIntegration of ERP Modules of different vendors or versions and E-Business Applications.IDBI decided for restructuring in 2008 for various business units which were customer focussed. Restructuring was through to streamline the business processes and improve the quality of customer service. Robust system was required so that all the managers can easily monitor earnings from each branch and also from each of its products which will help in increasing the profitability of the firm and also to maintain the growth.Problems before ERPIDBI was not in a condition to evaluate profitability of each segment of business at different level same customer and branch level.It was important for IDBIs future growth to assess the performance of their business units products which was not possible.IDBI Bank goes with seer AppsImplementation Process was basically carried out in 2 phases-Performance Management System was deployed in 2008 which included modules of vaticinator likeTransfer PricingProfitability passenger vehicleF inancial service Profitability AnalyticsAll these systems helped the bank to better collapse the performance of individual business unit and take necessary action if in case it was not achieving the desired profits. prophesier Consulting was engaged in 2009 to deployOracle Risk ManagerOracle Hyperion thinkIntegrated Approach Delivers Greater ControlOracle Transfer PricingNII contribution can be footfalld from assets liabilities with the help of oracle transfer pricing. It also allowed the staff to dissect NII contributions assets and liabilities.Oracle Profitability ManagerFor allocation of costs which is related to banks line of business and other branches, Oracle profitability manager was used. opinion-Since the data is coming from the single source, Earning reports which used to take two to three days, can now be produced within one or two hours.Oracle Financial Services and Oracle Profitability Analytics (Appendix figure 4)Information regarding profitability was delivered over internet using Oracle Financial Services Profitability Analytics. Now staff was in a position to analyse different trends, variances and the rankings across lines of business and products.With the help of the system on that point was a better access to important information which allowed Senior managers and other decision makers to accurately measure the performance of their portfolios and also their responsibility areas on a continuous basisIt helped in improving decision making quality which eventually increase the overall profits of the bankCapability to Evaluate Performance of EmployeesPerformance assessments can also be done on individual members of staff by the Oracle solution. Moreover it can be done at the group level also which enables IDBI to develop an assume reward system. It also helps in evaluating the contributions which are made at different levels.Automated Liquidity and Rate Risk MeasurementsOracle Risk ManagerTo assess the liquidity and interest rate risks which are calculated on day to day basis, IDBI Bank used Oracle Risk Manager. It helped IDBI to select the best place to allocate their funds. It also helped various analysts and other bank managers to measure the effect of interest and also the impact on NII or economic value.Effect-Advance analysis of assets and liabilitiesHelped in generating key info such as the avg.cost and financial return across various products, which ultimately helped in making better decisions.With the help of Oracle Risk Manager, IDBI became the 1st PSU bank which generated reports on asset liability management on daily basis.Streamlined Budgeting and PlanningOracle Hyperion Planning (Appendix- Figure 6,7,8)To create budgets and for rolling forecasts Oracle Hyperion Planning was used, which were basically linked to the profit and loss models and with the brace sheet as well. Sales targets can be fixed for individual branch and for individual product. Managers can then measure branch performances after an alysing variances across every area.Effect-To assess all areas, there was a common languageBusiness targets were set with the help of same metrics which was used to measure performance and budget can be planned accordingly.Resources were better allocated in line with their objectives since managers were in a position to easily determine what exactly is happening at particular branch.Why Oracle?Functionality provided by Oracles solution and Oracles previous experience in applying ERP in other top banks.Solutions offered by Oracles different modules were appropriate from their business point of viewExpertise of the implementation team of Oracle, previous experience, Flexibility of the Oracle system, comprise allocation principles of the bank convinced IDBI that based on their knowledge and skills they should engage Oracle again.Major Achievements of OracleDue to dedicated resources and efficient coordination among the implementation team of Oracle, the aggressive project deadlines we re met and implementation was successfully completed. preceding(a) Experience also helped Oracle team in implementation due to which testing, integration and data bloodline went well.CONCLUSIONOver the years, implementation of ERP has helped banking sector in a huge way. Integration of data has helped banks to dissect financial condition, account management and also helped in preparation of financial reports and statements. It has also provided solution for many things including cash management, cash security, cash accounting and payment processing.The need of the hour is to perform core banking activities and increase the quality of customer service by integrating its various components and avoid data redundancy.Industries look for ERP solution that can provide a common technology platform with capabilities of analyzing business data. They expect to meet the orbicular business requirements, with simultaneously adhering to the country specific necessities.Thus there is a signific ant improvement in IDBI after new solutions and restructuring. The bank can now handle almost 3lakhs transactions. It also helped IDBI to launch various new products and services. Rate of customer satisfaction also increased. There was a remarkable change in the revenue and the overall profit of the organization.