Business Process Management can help banks and financial institutions to save money and time while enhancing value added for customers. It controls and describes how the business is conducted as it should be (must be) driven by the business itself then directs implementation of a BPMS as a business and technology initiative while most of business initiative tends to be technology initiatives.
Financial services firms are squarely in the sights of BPM software vendors for good reasons:

• The banking standards of Basel II (III now) pressure banks to track their capital adequacy more closely.
• Banks live and die by profitability – their own, and that of their loan recipients – but have trouble measuring it and maximizing it.
• Often created by many acquisitions, larger banks encompass dozens of different systems that may not cooperate to follow the same product or customer around the country.

What financial services firms usually want from BPM is multidimensional profitability analysis, integrated risk-adjusted performance measurement and better planning capabilities. They also desire to be seen as meeting every standard for risk management, including the Basel II requirements.

It is mostly larger banks that have implemented BPM, but BPM is not just for the big guys. Banks, insurers and capital managers with less than $100 billion in assets are also looking to improve performance, but these mid-market financial institutions have held back on BPM, and not only because of cost. Some business intelligence tools they acquired from smaller software vendors are point solutions that provide fragmented functionality. It is also tougher for their smaller IT groups to integrate a multitude of such point solutions. That said, there are mid-sized banks that have completed very successful BPM projects.

The immediate trigger for adopting BPM may be that a CFO decides that not another day can pass without a single, integrated view of the business. Beyond such edicts, these firms take cues from what their peers and regulators are doing. They need more transparency, which helps improve management of operational risk. The non-traditional and non-financial measures delivered in BPM systems can help better manage risk, including credit card and loan exposure. Shareholders and account holders demand flawless, on-time reporting and consolidation. A manufacturer will face some pain if its quarterly earnings report is delayed, but for a bank, the same delay has grave consequences.
Financial services institutions need BPM to evaluate the profitability of customers, new products, payments and profitability in relation to risk and liquidity. For example, private banking or private brokerage clients are commonly assumed to be the most profitable; with a BPM system, that assumption can be proven or rejected. New product launches should encompass a performance plan that includes targeted revenues, costs, margins, market share, demographic distribution, customer retention rates and other financial and non-financial measures.

Profitability is not a simple result that stands on its own. For instance, a highly profitable service or product could be undesirable if it carries high risk and consumes too much liquidity.

On the cost side, banks want to manage the profitability of the various payments products they offer, and that requires granular tracking of costs at different times of the day. It is difficult to identify the true cost of a payment, much less understand exactly how the costs of different payments fluctuate during the course of a day and determine the desired mix of payment usage. Virtually no banks have a global view of payment costs and mechanisms to match costs to liquidity requirements and customer preferences, while tracking the enterprise-wide costs of fraud and risk.

BPM systems help financial institutions model multiple interest rate and currency exchange scenarios to see how profitability will be impacted with rate changes. Some of the leading performance management systems also include predictive analytic tools, which can be used to minimize risk. As an example, the system can look at your plan data and compare it to historical trends and external economic indicators, and help create a model of your business to provide a more accurate estimate of bad loans. BPM systems allow multidimensional analysis by product, customer segment, geography or other criteria.

KPIs that appear regularly on BPM dashboards in the financial services industry include measures of capital adequacy such as equity to assets, leverage, equity to loans and internal growth rate of capital. Other areas of focus are often asset quality, management quality, earnings and liquidity. Risk assessment is also a common thread in dashboards for financial services institutions.
A vendor that has both focus and expertise in financial services will tend to deliver better ease of use and lower overall cost. As contrasted to generic systems, a financial services BPM system will have built-in functions that are important to your operations and strategy, such as average daily balance calculations. Verifying compatibility with your existing systems is, of course, mandatory. Some vendors that provide vertical solutions for financial services include Oracle, INEA and SRC Software.

Look for applications that supply built-in financial intelligence by automating functions to accelerate your first benefits while reducing development costs. As customized BPM solutions were converted to a more packaged application format, some of the best-practice methodologies that the software vendors found at the largest financial firms were encapsulated. This has brought a quick-start and a higher degree of manageability, and reduced the IT burden. Some software vendors have introduced hosted solutions, acting as application service providers (ASPs). Also known as on-demand offerings, the ASP approach lowers the risk/entry barrier.

Regardless of what you do, many of your competitors are moving forward with BPM projects, and at some point will be better equipped to manage performance. Excellent solutions are available today, including ERP-based and industry-focused systems. With BPM applications designed specifically for financial services firms, well-targeted functionality and best practices are incorporated and costs are further reduced. The entry path and the incentives for deployment have become reasonably clear. Implementing BPM systems at financial institutions may be no easier than in other industries, but the rewards may be even larger as these new systems shed light on the complex relationships of product mix, cost, profitability, liquidity and risk.