What is a bank? A bank pools savings and then allocates that capital Current definition has evolved… Enterprise Software Company Mobile-app developer Utility Customer service organization Tool of government-mandated social policy Shareholder-return engine Policeman of criminals … Source: Wall Street Journal 36
Fintech attacking the banking value chain Lending Personal Finance Payments Retail Investments Equity Financing Remittances US$ +70bn Security, Fraud, Auth. Institutional Investments Consumer Banking Invested globally in FinTech in the last 6 years (CB Insights) Big Data for Risk Corporate Finance/SCF Big Data for Analytics 37
Competition from traditional players Not bound by size/geography Line of business specific 38
Customer expectations are changing Source: Cap Gemini World Retail Banking Report 2016 Customers have same expectations as they have with big tech firms 39
Economic environment U.S. Real GDP Unemployment Rate 20% 68% 9.0% 8.0% 67% 7.0% 6.0% 15% 66% 5.0% 4.0% 65% Unemployment Rate (left) 3.0% Wage Growth (left) 2.0% 10% 64% Labor Force Participation (right) 1.0% 63% 0.0% -1.0% 5% 62% 10-year Average -2.0% "Sustainable" Trend Growth -3.0% 61% -4.0% Y-O-Y (left axis) -5.0% 0% 60% 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013 2017 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Source: Commerce Trust Company, U.S. Bureau of Economic Analysis, Bloomberg 40
Regulatory uncertainty persists Regulatory trends for the banking industry in 2017 Dodd-Frank Progress Report Finalized rules 21% Rules proposed, but not finalized 9% Rules not proposed 70% Source: Davis Polk Law Firm (July 2016) Source: Deloitte Banking Regulatory Outlook 2017 41
U.S. banking industry continues to consolidate FDIC Insured Institutions 14,427 banks New Charters Total Institutions at Year End in 1985 15,000 228 new charters in 1999 and 300 only 1 new charter in 2015 # of FDIC insured institutions 12,000 250 # of new charters 200 9,000 5,170 banks Q3 2016 150 6,000 100 3,000 50 0 0 1985 1990 1995 2000 2005 2010 2015 Consolidation remains compelling as economies of scale drive significant value creation 42 All FDIC-insured institutions. Data as of 9/30/2016
Current technology situation ? • Disjointed customer experience • Lack of enterprise-level customer information • Digital demands stressing platforms ? ? 43
Legacy technology leading to replacement cycle 1970s 2010-2020 Big data Mobile banking Call Branch Center Single customer APIs view Apple Pay Open banking Credit Deposits Lending Mortgages Card Internet banking Real time Banks and Solution Providers have accumulated Technical Debt Customer expectations have evolved and banking IT systems no longer fit for purpose 44
Banks facing pressures from multiple sources Key Themes: • Competition • Changing Expectations • Uncertainty • Technical Debt 45
Core Transformation 46
Commerce bank response to shifting landscape • Super-Community Bank Platform • Core Values: We have a We We are We act with We strive for long term collaborate as ustomer xcellence ntegrity iew ne team focused • Bias toward action: We invest in our people, We are innovative and products and technology agile in response to a for the long term. changing world. 47
Core transformation business goals • Improve time to market • Enhance ability to innovate • Provide comprehensive view of customers • Address technology risk • Long term efficiency 48
Partner selection process Multi-year selection Cross-functional Extensive research of process: RFI, RFP , selection team: both US -based and demonstrations, Retail, Commercial, international solution customer reference Wealth, IT , Legal, providers activities Compliance, etc. Temenos provides a unique value proposition 49
Scope Replacement Integration Lending of deposits Platform Branch with existing and and customer Consolidation Platform channel Payments information applications systems Current Roadmap Probable Next Possible Future Steps 50
Why Temenos Modern Highly Shared vision Culture fit integrated core configurable and of the future banking solution flexible 51
Product leadership Mark Winterburn, Group Product Director
Innovation – key investment areas 1. Flexibility and scalability of product 2. Focus on architecture 3. Strength of front-to-back, vertically 4. integrated suites
Digital Banking Full customer lifecycle Lowest cost of ownership Operational Customer Contextual engagement Scale, speed, secure Efficiency Intimacy Digital Banking Customer centric Time to market New business models Beyond banking Innovation Collaborative ecosystem Innovation speed
Full Front-to-back Integrated Stack Mobile Internet Call Centre ATM API Branch Agent Channels Open Banking MarketPlace Marketing Risk and Compliance Services Front Office Sales Analytics Core Banking Payments Back Office
The market view - Suites 58
Integrated solutions freeing up budget for innovation 59 Rest of Banks* Temenos Clients Maintenance 53.7% 21.2% 21.1% Innovation Celent, IT Spending in Banking: Source: Temenos A Global Perspective, 2015* *Adjusted to remove Temenos customers
How we upgrade client software – decoupled innovation cycle Channels (6mths -2 years) Front Office (1-3 years) Core Banking (2-5 years) Upgrading product family independently reducing risk and reducing Time To Market
Technology and Architecture Perspective Branch Agent Internet Call Centre ATM Mobile API Framework Platform Channels Interaction Framework Design Framework Marketing Risk and Compliance Front Office Services Integration Framework Sales Analytics Component Framework Back Office Payments Core Banking Data Framework
Technology and Architecture Perspective USABILITY 85% faster UI Framework development Platform Interaction Framework MAINTAINABILITY Partial software upgrades Design Framework FLEXIBILITY across all software Lowest TCO through choice of stacks Integration Framework including Cloud. PRODUCTIVITY Component Framework 10X increase in customisation SCALEABILITY productivity 70% reduction in db size – in- AGILITY memory core banking 3x faster integration Data Framework
Analytics – Embedded inside the Suites Embedded Analytics Predictive Analytics Digital Analytics Customer Profitability Next Best Customer Embedded Product Digital Embedded Attrition Clickstream Analytics Analytics Campaign Funds Flow Analytics* Enterprise Risk Product PLAN 1.0 Analytics Customer UX Builder Management Lifetime Value Optimization* Advanced Analytics Platform Packages: Advanced Financial Reporting Wealth Analytics* Retail Analytics* Country Model Banks Analytics* Microfinance Analytics* Corporate Analytics* Advanced Analytics Platform API Services PowerBI Integration Analytics Dashboard Hub Reporting Platform Packages: Wealth Reporting Retail Reporting Financial Reporting Corporate Reporting* Country Model Banks Reporting* Microfinance Reporting* Reporting Platform
Digital banking Dharmesh Mistry, Chief Digital Officer
Digital Landscape Perspectives of the market 1. What is digital banking 2. Models for the bank of the future 3. Temenos front to back offering 4. MyState case study video 5. Demo’s: 6. Digital engagement • Embedded analytics •
A Perspective on the market
Our Addressable market – huge opportunity 66 8% CAGR 2016-2020 as predicted by Gartner $9 bn Digital focus Driving banking spend Annual spend on third party software 79% and maintenance of bank IT spending is still in-house (IDC)
Core renovation is critical for digital strategy 67 Top barriers to the success of a digital strategy 1 Complex and legacy core Heavy investments in channel banking systems solutions, without supporting back office business capabilities... deliver only a 2 Regulatory environment minor share of expected value. Securing budget from 3 the Board Source: PwC Global Digital Banking Survey
The pressure on scalable systems is bigger than ever 68 Interactions per month 12.6 51.1 1.8 2004 2015 2020
Everybody now expects the Starbucks/Uber experience everywhere 69 Customer’s Perspective on FinTech Value Proposition 1 Ease of Use 2 Faster Service 3 Better Experience
And banks have the right advantage 70 Trust 10
…to deliver Experience-Driven banking Contextual and Relevant Bank as facilitator and trusted advisor
…to deliver Experience-Driven banking Contextual and Relevant Bank as facilitator Fintech Co’s Instant fulfilment and trusted advisor
Digital Banking The (almost) complete story
What is Digital Banking: The fundamental digital equation 73 {A 3 } {B} {C} Anytime, anyplace, any Better banking – customer Contextual – the service, channel – this is what journeys that are unencumbered communication, rewards and customers expect. Whether they by paper, process and people, products you offer to meet are retail bank customers, High frictionless and delivered at the customers’ expectations, need Net Worth (HNW) investors or lowest possible cost through to be driven by data and corporate customers – their cloud deployment analytics and personalized to expectations are banking on their requirements. their terms. D Digital banking
74 Think for me Relevant Engagement Know me Campaigns engine Connected Social Marketing Mobile Micro-messaging Conversational Interfaces I feel supported Tablet Partnerships Empowerment Online VOC Seamless Offline STP Encryption Enablement channels Responsive Big Data Safe CMS Smart Hybrid wearables Email Marketing automation Digital Personal Account Real Time / Assistants Behavioural Single Brain AI timely Content Strategy Cloud data Video chat Internet of Things (IoT) Economics / nudge Data Privacy Digital conversation Integrated Architecture Real Time Marketing Insight & Analytics Real Time Servicing Adoption cycles collaboration APIs Design Fiction / Vision Biometrics Personalised Customer Service Ease Digital strategy Cyber Security Marketplace / Fintechs Social Analytics Mobile Wallet Open Platform Chat Convenience ID Management Digital Culture Insight IA Media Megatrends Co-creation Mobile Payments Digital Anthropology CRM Simplicity WCM Engagement Contextual Real Time Sales UI Digital Natives platforms Watches Disintermediation Design Thinking Segmentation Omniscient web Account opening Consumer Psychology Communication Smart search AR Understand needs Self Serve ECM Models / BAAS Feel valued Predictive Data What's App PSD2 Bots Digital Signatures Blockchain Regtech Data multi-channel Communities Programmatic SMS Native apps Meaningful Chrono-biology / chronemics / NLP MIFID 2 Omni-channel Gamification Loyalty Authentication & ID Alerts Frictionless interactions Facial Beacons VR PFM Intelligent recognition permission Digital Vault Blockchain Seamless security Bitcoin Analytics marketing NFC marketing Systems Thinking Data Protections Email marketing Personalisation Corporate entrepreneur / Lean
75 Connected Real Time / timely Feel valued Engagement Know me Empowerment Offline channels Social Media Micro-messaging What's App Meaningful Enablement Convenience I feel supported What I experience How I experience it web Mobile Alerts Email Native apps Video chat Chat Online Contextual Relevant Ease Think for me Safe Frictionless interactions Tablet Communities Smart Hybrid Digital conversation Watches wearables Personalised Seamless Responsive Communication Simplicity Partnerships Systems Thinking collaboration Digital strategy Understand needs Adoption cycles Digital Natives Insight Customer eXperience Integrated Architecture Models / BAAS Segmentation Analytics Customer Service Manage my money How we How we function empathise to deliver it Digital Culture Design Thinking APIs Digital Anthropology Consumer Psychology Digital Banking Chrono-biology / chronemics / NLP Behavioural Economics / nudge Co-creation Marketplace / Fintechs Design Fiction / Vision Execution eXperience VOC Megatrends platforms Disintermediation Corporate entrepreneur / Lean Smart search Account data Self Serve Account opening Technology change & regulations STP Digital Signatures Real Time Servicing Bank – how we deliver Marketing automation Real Time Marketing Real Time Sales Mobile Payments Omniscient multi-channel Insight & Analytics Data PSD2 Regtech Email marketing CRM Engagement Programmatic Content Omni-channel IA UI Cloud Bots Mobile Wallet AR PFM Campaigns engine Analytics marketing Internet of Things (IoT) Big Data Bitcoin AI Bank – how we Cyber Security Biometrics Encryption Authentication & ID message it Conversational Interfaces VR Predictive Data CMS / WCM / ECM Personalisation Data Protections Data Privacy How we protect NFC Open Platform Blockchain MIFID 2 Beacons SMS Loyalty Content Strategy Single Brain Blockchain Seamless security ID Management Digital Vault Digital Personal Assistants Intelligent permission marketing Gamification Social Marketing Facial recognition
Bank of the Future
The digital bank of the future has multiple models 77 A flexible, scalable and open core that enables a compelling and engaging customer experience Distribution Channels: Self serve, assisted & external channels Customer Experience & Vertical Value Proposition Engagement Front Office Sales, Marketing, Service Horizontal value proposition Core Banking Platform Account management Flexible architecture & Efficiency Banking Licence Governance & Reporting
The WHOLE is GREATER THAN the sum of its parts…
Full Front-to-back Integrated Stack Mobile Internet Call Centre ATM API Branch Agent Channels Open Banking MarketPlace Marketing Risk and Compliance Services Front Office Sales Analytics Core Banking Payments Back Office
Front Office Internet Call Centre Branch ATM Mobile Agent API Channels Content mgt. CRM Contact mgt. Simulations Prospects Party Relationships Gamification* Treasury Trader Risk and Compliance Front Orders Rewards Alerts Document output Office Portfolio Analytics Leads Scoring Image Management Investment Real-time PFM SLAs Recommendation Marketing Descision Engine “Single Brain” Goal Based Social media Origination Instant Messaging Planning Document Suitability & Marketing Diary 360 SCV Investment Profiling validation catalogue Back Office *2017 delivery
Back Office - Retail Internet Call Centre Branch ATM Mobile Agent API Channels Risk and Compliance Checking /DDA Certificates of Posting Product Builder Product Catalogue accounts Deposit Restrictions Analytics Retail Savings Bundling Bill payments Overdrafts Back Office Time deposits Mortgages Mutual Funds Customer FX Reconciliation & Limits / Collateral Consumer finance Auto Finance Matching Direct debits/ Transaction Safe Deposit GL & Accounting standing orders Recycler
Here and now & Future focus 82 Here and now Future Focus (0-2 years) (5-10 years) Customer experience (optimise) Experience banking (engagement) Open Platform : Flexible Advanced Computing - Componentised architecture - Tech Integration architecture (new models) Artificial Intelligence (predictive thinking) Analytics (Big Data + meaning) Cyber Security Cyber Security (Advanced computing) Culture - Digitally emerging Culture - Digitally mature (in the DNA) (Augmentation)
DEMO Demo’s
EA Demo 84
Creating a Digital Bank From The Ground Up ! We wanted to build a digital bank quickly… What we achieved with Temenos was remarkable. Dan Dickinson, VP of Digital Banking, EQ Bank
Temenos – a leader in digital banking Temenos created an architecture that With Temenos UXP, banks get capabilities supports a digital that equip them for the digital economy. Ovum recommends that banks shortlist Temenos banking foundation that when searching for a competitive digital is second to none. banking platform solution.
Creating shareholder value Max Chuard, CFO, COO
Agenda 90 Creating shareholder value 1. Drivers of growth 2. Medium term targets 3.
Creating shareholder value
Temenos drivers of value 92 Substantial revenue growth Business model drives margin expansion Shareholder d value Significant free cash flow generation Disciplined capital allocation
Substantial license revenue growth 93 Medium term Non-IFRS Total Software License Revenues target of 15% USDm CAGR 300 250 200 150 100 50 0 2013 2014 2015 2016
Significant growth in recurring revenue 94 Non-IFRS Maintenance, SaaS and Subscription revenues USDm 350 300 250 200 150 100 2013 2014 2015 2016
Business model consistently drives margin improvement 95 Medium term Non-IFRS EBIT margin target of 100 to 150 bps expansion p.a. 29.4% 28.1% 27.3% 24.1% 2013 2014 2015 2016
Outstanding double digit growth in profitability 96 Medium term target Non-IFRS EBIT (USD m) Non-IFRS EPS (USD) of 15% CAGR 2.07 187 1.73 157 1.44 128 1.22 113 2013 2014 2015 2016 2013 2014 2015 2016
Exceptional cash flow generation 97 Medium term Operating Cash Flow and DSOs target DSO reduction of 5-10 days p.a. USDm 198 days 180 days 154 days 127 days 300 250 200 150 100 50 0 2013 2014 2015 2016
Disciplined capital allocation 98 Capital allocation 2013 – 2016 Share buyback Acquisitions 35% 48% 17% Dividends
Track record of M&A 99 2007 2008 2009 2010 2011 2012 2013 2015 Proposed acquisition announced in 2017
Balance sheet strength 101 2013 2016 Total available financing USD 350m USD 875m Weighted average interest rate 5.0% 3.3% Weighted average maturity 4 years 3.6 years Leverage ratio 0.6x 0.8x Low-cost debt structure with significant flexibility
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