It’s a Fact: Temenos Customers Are More Profitable
Each year, we produce a report with our partner Deloitte looking at the profitability of financial institutions running modern technology compared to those running legacy software. What we find is that financial institutions running modern software perform much better, with an average 20% higher RoE than firms running legacy software. But, Temenos customers show the highest outperformance with an average RoE that is 36% higher than firms running legacy.
So Why Are Temenos Customers More Profitable?
The key to driving higher profitability is end-to-end, integrated solutions, what we refer to as our product suites. These allow for financial institutions to extract the highest possible automation and economies of scale from their IT operations while having the analytical capabilities and the integrated channel management to launch real-time, customer-specific campaigns and offers. Or, to put another way, we give our clients the platform to cost-effectively provide “experience-driven banking” – the right products, personalized to individual customers, offered at the right time and over the right channel.
Four Ways Temenos Helps Banks and Financial Institutions Boost Their RoE:
1. Enabling Our Clients to Raise Their Asset Yield Within Their Existing Business
There are two main means to raise asset yield in an existing business and we help with both.
- The first is by managing risk better, so our clients take lower provisions against their assets. The second is by selling more services to existing customers. In both cases, we enable our clients to so by providing complete, real-time information with the analytical tools to capitalize on it. Compared to the industry average of 2.1 products per customer, Temenos customers achieve 2.7 on average.
2. Enabling Our Clients to Lower Their Operational Costs Sustainably
- Cutting costs is easy. But cutting costs in a way that is both sustainable and supportive of a bank’s future growth prospects is more challenging. It requires streamlining and automization of processes – optimizing a bank’s operations rather than simply cutting them back. Legacy modernization is key.
- With our solutions, our customers lower costs sustainably, whilst also making themselves more flexible and agile.
- They are also able to redirect IT spending from maintenance to innovation. Against an industry of just 21.2%, Temenos customers spend 55.7% of their budgets on innovation.
3. Enabling Our Customers to Extract Economies of Scale
- Modern technology is essential to realize scale economies. This is the case for both organic and inorganic growth.
- Utilizing Temenos’ integrated and scalable technology allows our clients to add more and more volume without a corresponding increase in hardware, software or labour costs.
- Bank of Shanghai is adding around 700,000 new retail and corporate customers a year on its Temenos Core Banking platform and its productivity is ballooning. For example, its ratio of IT costs to total assets is 44% lower than its domestic peers.
4. Giving Our Clients the Agility to Move Into More Profitable Markets and Segments
- An important way to grow RoE is for banks to exploit segments and markets that generate higher margins. Clearly if all banks did the same then margins would fall. So the key is to reposition the bank’s operations effectively and quickly.
- Temenos’ modern core banking system can help on both counts.
- Our systems enable banks to build highly personalized and differentiated products and services. They also enable banks to launch them quickly whilst maintaining consistency to enable a true multi-channel experience.
- As a recent example, Temenos was able to help Commercial Bank of Africa to launch a brand new, fully digital bank called M-Shwari. A partnership with Safaricom, M-Shwari was aimed at M-Pesa users, to provide them with savings and loan products. Launched within 5 months at the end of 2012, M-Shwari attracted 1m customers in 40 days, 3m in 3 months and now has over 11m users. It has also been taken into other African countries such as Tanzania.
Given Bank of Shanghai’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.
In the first 40 days of M-Shwari having opened its mobile doors with Temenos in November 2012, the Bank on-boarded 1M customers. After 3 months, they had 3M customers. To date, M-Shwari now has 25M million customers growing at an average rate of 10,000 new customers per day.