Bank of Shanghai, a City Commercial Bank based in Shanghai is a commercial bank serving individuals, small and medium-sized enterprises and large corporations. The Bank is ranked 73rd among 1,000 banks around the world in 2020 by the British magazine The Banker in terms of Tier 1 capital and is the 16th largest in China.
Today the Bank has 15M customers and 19M customer accounts served through 430 branches, processing on average 5M transactions per day, with a peak transaction per second rate of 226. The online and self-service transaction rate stands at 90.84% as at the end of 2017.
Most importantly the Bank of Shanghai achieved an enviable cost income ratio of 20.71% at the end of 2016 as per the Banker Top 1000.
The Chinese financial market has always been highly regulated, and in many ways still is. It was enough in the past for the bank’s legacy core banking application to just be highly performant because banks were unable to differentiate through products and services. As the market has opened up, as customer expectations have changed, as competition from organizations such as Ant Financial and WeChat compete or potentially collaborate, having a highly performant application is just not good enough.
Today, banks need to achieve the conflicting objectives of both extreme flexibility AND extreme performance. This is what the Temenos Transact provides for the Bank of Shanghai for the last 10 years and the next 10 as they upgrade to the latest version of the software.
Development costs have been cut by probably in excess of 90%
The Legacy System Simply Being Outpaced by Change
Like all traditional banks, the Bank of Shanghai had evolved its application landscape over many years creating silos of functionality and data across its retail and corporate lines of business, operating separate systems for risk and cash management. Essentially a complex environment that became increasingly difficult and costly to maintain and most importantly slow to get new products, services, and innovation to market.
Its legacy had evolved around account and accounting as opposed to being customer-centric. So the bank had no view of a customer relationship and thus had no ability to develop business with the customer through, potentially, preferentially pricing or offering other attractive value-added products or services.
In addition, the legacy applications had been designed for a rigid current-state without anticipating the need for change and thus program code defined many of the attributes of the products and services being offered.
75% reduction in time taken to grant a mortgage
“All BOS customers will have noted an improvement in service since Temenos Transact was introduced.”Mr. Jiang, Vice President
International Best Practice & Standards Are the Future
The bank realized that the world was changing and that China would be an important part of the global economy. The bank needed to prepare itself for the opening up of the Chinese market and to support Chinese companies expanding overseas. The Bank made the decision that its software would need to act as a change agent to promote international best practice within the bank.
Four international core banking vendors were evaluated over a 10 month period and Temenos Transact was chosen because of:
- Level of integration
- Implementation track record
- Broad functional coverage across both retail and corporate lines of business
- The strength of its business processes
- And most importantly, the potential to scale to meet the projected volumes
“Temenos gives us a centralized and robust platform which will allow us to scale our business and at the same time, leverage our IT investment.”Mr. Bai, IT General manager
So How Do You Eat an Elephant That’s This Big?
The answer is: we don’t eat elephants – but if we did, it would be a piece at a time, usually relatively small pieces. However, China is different.
Given the bank’s legacy applications were siloed by a line of business, retail and corporate, this provided the opportunity to move each line of business to the new Temenos Transact system independently of one another. We would call this “big bang” by line-of-business has given the scale of each migration and the impact on the entire bank of Shanghai organization.
Corporate was the first line of business to be implemented, which took 15 months to deliver the Ningbo Branch as the initial “pilot” which was then followed a month or two later with a “Big Bang” migration of 200,000 corporate customers and accounts across 210 branches. Retail kicked off after Corporate was in production, so that much of the expertise and lessons learned by the 200 man Bank Project Team could be applied to migrating 10M customers and 12M accounts – a much simpler product set but much greater volumes and integration complexity. Retail took just over 2 years with a significant focus on testing since ALL 10M customers, ALL 12M accounts and ALL 210 branches would migrate at the same time. Big Bang for Retail.
Given it was the first customer in China and the largest volume bank for Temenos at the time, significant effort went into developing Chinese business practice and regulatory functionality. In addition, given the scale of the migration, significant work went into performance and TESTING, TESTING, TESTING.
A new product is launched every 1-2 weeks
So Has the Bank Benefited From Implementing the Temenos Transact System?
Most certainly. The bank is now extremely well-positioned to ride the Digital Revolution that’s occurring in China and globally.
Given a much simpler integrated application landscape designed around customer the following business and IT benefits have been delivered:-
- Customers now receive seamless customer service across all channels. Over 90% of daily transactions are now performed by the customers themselves, one of the highest rates in the industry. Faster decisions are possible, mortgage approvals are 75% quicker than before the transformation and this improved customer experience is being reflected in the financial performance of the bank
- Products are now created at a radically reduced cost requiring and much reduced time and much less effort, this being in the order of between 60% and 75% than experienced for the legacy system.
- Real-time integrated and complete information provided by Temenos Transact has considerably improved risk management and executive decision-making.
- A simplified application landscape across the retail and corporate business deliver higher IT productivity through easier maintenance and the functionality and benefits that Temenos delivers as part of annual maintenance releases and simpler more efficient operations that drive the cost income ration down to 21% one of the lowest in China among the large banks.
- Scalability and performance is a pre-requisite to anything else in China and as customer’s move to mobile self-service achieving an effective balance between EXTREME PERFORMANCE and EXTREME FLEXIBILITY is a critical success factor in driving the business forward.
“Temenos Transact has enabled Bank of Shanghai to launch a number of truly innovative and pioneering products, in particular by combining corporate and retail products. Not only that, but Temenos Transact has also dramatically reduced the time to market for new products – by a factor of several times.”Mr. Zhao Gang, General Manager – Product Innovation Department