Whitepaper_From Middle Line to Top Line

The Changing Dynamics of Lending enterprise solutions Page 1
From Middle-Line to Top-
Line
The Changing Dynamics of Lending
Enterprise Solutions
Technology is changing the way people bank and the way banks operate. Customers
continue to be the most influential driver, influencing the way financial institutions
invest in enterprise solutions. While a majority of financial institutions still look for
traditional benefits offered by enterprise solutions, a new breed of tech-savvy lenders
are investing for a brighter future. This paper examines the rationale for this change in
approach by these lenders. We draw parallels by taking a look at other industries –
from Insurance to Consumer Goods to Manufacturing - that are changing the very
reason they invest in enterprise solutions.

Over the years, enterprise solutions have evolved – they
have become more capable and complex, they have
increased performance levels and flexibility. And all the
time they have become an integral part to organizations’
approaches to on cost reduction, or the middle-line.
A fresh perspective is that enterprise solutions not only
improve the Bottom Line of lenders but also contribute
to the top-line as the business scenario is becoming
more competitive. This paper seeks to answer the
following questions:
1. What factors are driving the adoption of modern
enterprise solutions’ in the banking industry?
2. What is enabling the transformation of thought
from middle-line to top-line?
3. What are the business transformation drivers
across various industries?
4. What is the global trend in adoption of
enterprise solutions?
5. How can lenders align themselves to the
changing market dynamics?
6. What are some of the challenges facing the
lenders and how can they overcome them?
1. What factors are driving the
adoption of a modern enterprise
solutions’ in the banking industry?
With rapid innovation in technology, banks are facing
stiff competition from Alternative and Peer-To-Peer
(P2P) Lending. Firms such as PayPal and ApplePay have
already made significant impact in the payments space.
Similarly, Lending Club, Prosper and OnDeck have seized
the alternative lending space due to the first-mover
advantage.
Today’s consumers are very technology-savvy. They
want enhanced customer experience driven through
Omni-channel experience – branch, online, social,
mobile, and phone augmented by a seamless branch –
digital experience. This is especially true of developed
markets where technology has penetrated to the last
mile. This is also reflected in the banks' digital strategy
as most of them have allocated significant IT spending
for consumer technology initiatives. McKinsey estimates
that employing digital initiatives can increase the top
line by as much as 30% in consumer areas like Lending
and Payments1
.
1 The rise of the digital bank – McKinsey & Company
Differentiation is a key business impact that IT
investments are driving. With the banking space
becoming commoditized, customer service and
experience is being looked upon as a major source of
competitive advantage. Globally, non-profit member-
owned institutions Mutuals are focusing on this
particular aspect when investing in enterprise solutions.
Solutions.
Operational efficiency is still a performance indicator
that banks are seeking to improve through platforms like
SOA (Service-Oriented Architecture) and automated
workflows to reflect the intense competition and the
need to deliver shareholder returns. Affordable
solutions are driving smaller Banks and Mutuals towards
increased enterprise technology adoption.
Scalability and need to enhance market share are driving
investments in technologies such as Big Data and
Analytics for enhanced data-driven decision making.
Many firms are already seeing returns as cross-selling
and up-selling driven by Predictive Analytics have
integrated Banks’ lines of business into a single entity.
This is possible due to a unified 360° view of the
customer from better integration of Analytics into
lending, core banking system and other platforms.
2. What is enabling the
transformation of thought from
Middle-Line to Top-Line?
It is no surprise that enterprise solution vendors' focus
have slowly but steadily shifted away from reducing
costs to creating value for their customers. Banks
invested in enterprise solutions for traditional benefits
such as:
 Reducing costs through automation
 Eliminating errors and manual processing
 Providing a single point of control for all
business processes
The new value-based view, however, requires significant
efforts on the banks’ part to plan the transformation
phase. It also demands significant non-monetary
investments like managerial commitment. With most
banks having realized significant cost reductions by
adopting technology solutions, the focus now lies on the
Expected Loan Volume of P2P
Lending in 2018 in Australia
$22
Billion

top-line. This is imperative as the shareholder value can
no longer be improved by decreasing the middle line.
Let us now look at some of the factors that are driving
this change.
2.1 Technology led Transformation
Banks are now looking at growing their top-line through
technological advances in their operations. One of the
Big 4 banks of Australia deployed Big Data & Analytics
solutions to offer personalized experience to its
customers. A major US commercial bank used similar
solutions to develop a unified view of its customer to
maximize the lifetime value that they could realize.
The latest trends in technology – Analytics & Big Data
are changing the landscape of enterprise solutions
ecosystem and businesses, in turn. One of the biggest
revolutions has been the Supply Chain & Logistics
industries where Data Analytics has transformed the
industry from shop-floor run to computer-controlled.
Technology is now the backbone of the industry.
Similarly, Big Data continues to have a significant impact
on the services sectors like Insurance and Healthcare.
Significant levels of manual work have been replaced by
automation in underwriting, risk management,
compliance, etc. Insurers are looking at increasing their
top-line through delivery of better services and
operational efficiency.
2.2 Customers Mean Business
As customers evolve to become more knowledgeable,
Banks are expected to provide cutting-edge products
and exemplary experience through prevent customer
churn. This is in light of heightened competition and the
need for enhanced service delivery. Banks are tackling
the same using innovative technology to counter
increasing customer acquisition cost.
Customer Relationship Management (CRM) and
Customer Acquisition System (CAS) solutions have
evolved to accommodate the latest technological
developments like Business Intelligence (BI), Data
Analytics and Social CRM. e-CRM is becoming more
commonplace via software-as-a-service (SaaS) delivery
model. An added advantage includes better integration
of CRM solutions with advanced enterprise solutions
leading to better data harvesting and seamless working
across departments.
Many industries continue to use the latest CRM
techniques – FMCG, e-commerce, Financial Services, etc.
to improve their customer experience management for
better top-line through better conversion ratio and
longer relationships resulting in higher customer lifetime
value.
Top ranked Tech innovation priorities
2.3 Innovation Driven top-line
Technology has enabled new business models, profit
streams and exploiting the exploitation of uncharted
territories. Enterprise mobility is an area of focus as
companies are spearheading launching initiatives to
improve customer experience in of banks & other
financial services firms. Mobility is used not only to
improve customer experience but to drive the
productivity of employees through increased flexibility in
the functioning of systems. Many banks are now using
mobility to for better tracking of their debt collection
processes.
As technology advances, banking too has undergone a
sea change. While companies like ING Direct have
pioneered the concept of online banking, customer
preferences have driven mainstream banking online and
mobile, primarily driven by smartphones and increasing
broadband penetration. This has resulted in innovative
business models like P2P and marketplace lending.
3. What are the drivers of Business
Transformation across various
industries?
Banking & financial services industry is a highly complex
industry exhibiting characteristics of many other
industries, where many firms have leveraged technology
to not only improve their Bottom Line but capture an
additional value for a better top-line.

Some key trends from three industries that bankers
should consider.
3.1 Common Fundamentals – Insurance Industry
Property & Casualty Insurance, especially in developed
markets has now begun to focus more on the top-line
than the bottom line. Customer centricity is the buzz
word as solutions like Telematics are widely
implemented in conjunction with Big Data to understand
their customers’ driving behavior. Leading insurance
companies are prioritizing top line by:
 Identifying the most valuable customers and
ensuring high sales retention
 Growth – organic and inorganic through seamless
integration of systems and processes
 Customer self-servicing capabilities
 Automated Underwriting & Pricing
 Automated claims – processing
Insurers are investing heavily in the systems for the
future by harnessing the latest technological advances in
their core systems. Mobility is a focus area for insurers
as customer acquisition, servicing and claims settlement
moves truly online. Many leading insurers now employ
powerful algorithmic driven systems, data visualization
tools and advanced analytics for improved business
performance through more accurate insights.
3.2 Consumer Is the King – Retail & Consumer
Goods Industry
As consumers become more demanding, most retail &
consumer goods firms have struggled to keep up with
rising customer expectations, thus impacting their top-
line. Zara is a household name in fast fashion –
consumers love it; competitors admire it. Zara’s
disruptive business model required a new approach to
Enterprise technology. From mobility to predictive
analytics, everything is interwoven into Zara’s supply
chain. Zara’s systems are designed for high velocity of
data and rapid time to market.
Consumer goods is an industry where focus has been on
improvement of existing systems by harnessing
innovative technology solutions like Social Media,
Analytics, etc. This has led to significant growth 2
for the
2
McKinsey – Winning with IT in consumer packaged goods: Seven
trends transforming the role of the CIO
industry players – a key outcome that Banks are looking
for in their lending businesses.
Social enterprise solutions are fast becoming “must-
have” rather than “nice-to-have” for consumer-facing
firms. A leading UK retailer chose to harness technology
for better collaboration among its employees, which is a
critical value creator for businesses.
“We want to put technology in the hands of all our
colleagues, whether in the store, distribution center or
office, so they can create value for our customers,” -
Tesco
3.3 Top-Line value focus – Pharmaceutical Industry
The pharmaceutical industry over the last few years has
been obsessed with operational cost rationalization due
to their massive investments in equipment and drug
development. However, with most companies facing the
challenge of cost rationalization, pharmaceutical
companies are trying to increase their sales revenue
within their patent protection period through advanced
technologies. Predictive modelling for biological
processes and drugs by leveraging the diversity of
available molecular and clinical data can improve
pharma drug pipeline. Big Data and Analytics are going
main-stream in this area to drive faster GTM and
increased revenue. Pharmaceutical companies are
making investments to:
 Generate and management of real time operational
data to reduce time to market for new molecules
 Optimize channels and drive increased revenue
 Improve sales force effectiveness
Eli Lily, a Leading pharmaceutical firm has implemented
a targeted marketing campaign using predictive analytics
resulting in significant growth in revenue as well as cost
savings of more than 50%. This is an illustration of how
pharmaceutical firms are investing in their systems
beyond manufacturing as well to augment its top-line
growth. Big data is an area where many pharmaceutical
firms are investing for better decision making.

Top ranked Tech priorities for Enterprises
Many consumer-facing firms are employing latest
advances in technology like enterprise mobility for sales
representatives to improve productivity, which is
expected to be integrated with the pharmaceutical value
chain.
4. What is the global trend in
adoption of enterprise solutions?
While developed markets continue to dwarf developing
markets, rate of adoption of Enterprise solutions like
cloud, analytics and big data is significantly slower due
to the burden of legacy systems. The United States
stands out among developed nations with a very strong
track record in adoption of enterprise technologies.
Business Transformation: Global Trends
USA
Kroger, the US retail chain is pioneering a technology to
reduce queues at its stores similar to the Time-to-Yes for
a bank's service. Its enterprise solutions combine
predictive analytics, sensing technology and complex
simulation to ensure customers never have more than
one person ahead of them in the checkout line. Brett
Bonner, senior director of R&D at Kroger, says the key
business metric is higher customer satisfaction levels.
“We were interested in a better shopping experience."
The impact of such a technology has been increased
customer loyalty, better service and improved customer
experience – all key factors in improving the top-line of a
company.
The US has been at the forefront at adopting new
initiatives. Spearheading this is the Mutuals sector which
has been investing proactively in technology. Customer
experience has been the focus as many Credit Unions
have adopted cloud based lending solutions to maximize
the Return on Investment through higher revenue.
UK & Europe
A key theme across the UK has been enterprise mobility
solutions. While the first wave of adoption was driven by
customer experience, the next wave is being driven by
the need for scalability and growth. An impressive 86%
of UK businesses implementing mobility initiatives have
either already seen, or anticipate seeing, a reduction in
time-to-market for delivering new applications and
services as per a study by CA Technologies. In addition,
84% have seen or anticipate seeing an improvement in
customer satisfaction and an improvement in the overall
user experience and more than half (51%) anticipate
increased employee retention and productivity.
CRM, especially CRM SaaS is another technology that is
being used by companies throughout Europe. Philips is
using cloud solutions for Sales, Marketing, Service, etc.
to obtain a unified customer view. “We are creating
local solutions, while leveraging global scale,” says Wim
Van Gils, Vice President of Global Commercial Excellence
at Philips.
Australia & New Zealand
Commonwealth Bank has been one of the biggest
advocates of deploying enterprise solutions for
improving top-line. It implemented numerous solutions
to build a flexible, customer-centric architecture to
improve service and value. This has resulted in shorter
GTM time-frame, product simplification and better
customer satisfaction. It has also seen increased product
cross-selling and increase in sales by as much as 10%.
Honda Australia has made a compelling business case
for chasing top-line growth by deploying CRM Solutions.

Honda outlined its program Customers for Life to
achieve a 360° customer view. This resulted in the
creation of a single platform involving with data
collection from multiple platforms like Honda Australia
Rider Training (HART), Automobile Association
memberships, and several other sources of data.
Harmonization of data has ensured streamlined
campaigning and improved lead generation with
Analytics for a ten-fold increase in its database i.e. ten
times the opportunities for cross selling and up selling3
.
Asia
Singapore is an example of how a country's enterprises
have recognized the importance of enterprise solutions
for top-line growth. NCS Group’s study Solutions for
Urbanized Future (SURF) Emerging Technologies
Maturity Index 20154
shows that 58% of CIOs support
business transformation initiatives, up by 5% from 2014.
Supply Chain, Transportation & Operations are the
primary areas of investment as next generation
technology has taken center stage.
One of the most ambitious projects in India to drive top-
line has been the project by India Post. The platform has
been envisioned to provide greater variety of products
and increase market share in the deposits segment. This
involves migration from Sanchay Post, a LAN-based
application to a modern core banking platform. Other
major benefits include regulatory compliance (AML/KYC
Norms) and improved service quality to customers. India
Post also aims to develop new services which can be
sold to its diverse set of customers across the country.
5. How can lenders align themselves
with the changing market
dynamics?
Banks and financial institutions need to better
understand the impact on their business if the right
investments are made in enterprise solutions and the
longer-term strategic perspective must be considered
alongside the shorter-term accounting/finance
perspective. A top-down approach driven by business
leaders rather than IT departments is required.
Important points for business transformation:
3
Salesforce – Honda Australia success story
4
NCS SURF - http://surfnation.net/
 Develop a holistic business strategy and align IT
investments with strategic priorities
 Focus on the long-term benefits of solutions rather
than solely on short-term benefits
 Target business performance parameters like
customer experience and satisfaction, time to
market that lead to better top-line
 Do not ignore other aspects of business
performance like regulations & compliance,
competitive scenario, innovation, etc.
 Actively partner with end-to end solution vendors
rather than outsource a portion of business process
 Invest in technologies that will benefit the company
and manage growth effectively and efficiently
 Develop a customer-centric 360° view of your
business
 Seek out success stories from other sectors
especially related sectors like financial services,
capital markets and Insurance to incorporate best
practices within their own system
The Business Impact
The expected business impact of the above measures is
a significant change in the dynamics of the company.
The changes can impact business adversely unless
managed effectively as the ripple effect of any moves
may be felt across the entire organization. Today’s
banking technology is sophisticated and it takes time for
its true impact to be felt so don’t expect immediate,
short-term payback.
In the long-term, many firms would realize that in
today's financial world, focus on long-term sustainable
growth is of critical importance. These are the very
factors that motivate most firms to adopt
transformational solutions. It not only allows firms to
exploit major revenue areas but plug possible revenue
leaks.
While performance indicators do improve over a period
of time, it has to do so across the board for product
categories for a balanced business performance. The
product portfolio review is required to ensure measures
are taken to maximize the impact on all product
categories. Product view and customer view, two
diverse perspectives that measure the profitability of
products and customers need to be considered. This is
critical in the banking industry with a plethora of
products across diverse lines of business.

6. What are some of the challenges
that Lenders will face and how can
they overcome them?
It would be unrealistic to expect banks to move to the
new perspective without encountering any points of
friction or challenges. Challenges exist at various levels
of the organization.
6.1 Strategic Challenges
Initiatives that require business transformation need to
be driven from the top. In such scenarios, technology
acts as a catalyst in the overhaul of business processes.
This requires a change in the objectives of the firm and
change in the prioritization of investments.
Disruptive technology deployment often requires bold
initiatives by the top management. In most cases,
however, senior management chooses to focus on the
middle-line rationalization than top-line growth. In most
financial institutions, it has been seen that IT is no longer
the domain of technology specialists but business users
like Marketing and Finance. This has made decision
making more complex than before. This can be resolved
only through a top – down approach with a vision driven
by the senior management.
6.2 Operational Challenges
Despite disruptive thinking by senior management,
execution is often overseen by middle management or
operational executives. It is imperative that the middle
management is aligned with senior management; a
challenge faced by many a firm. Another imperative is
adoption of new enterprise solutions like SaaS products,
cloud solutions or mobile solutions. While purchasing
the same is a critical decision, it is equally challenging to
implement the same.
What complicates the scenario is the inability of
managers to move out of the legacy systems due to the
inevitable friction caused due to business units. The
transition towards a long-term top-line focus can be
achieved by adopting innovative solutions that often
work with legacy systems. The middle management has
to prepare a transition roadmap to steadily move away
from status quo and migrate to newer and highly
disruptive platforms steadily to minimize friction within
the organization.
6.3 Customers’ Demands
This is primarily from a customer perspective. While
there have been a few cases of companies looking for
transformational solutions, most companies fear to
tread the road due to possible impact on their
customers. It is especially found in industries where
customers have a significant say in the functioning of the
firm like Consumer Electronics & Durables, Automobiles,
Banking & Financial Services, etc.
While there is no panacea for the problem, firms will
have to ensure there is no impact on their customers,
even if it means investing more for their customers in
the short-term to attain long term benefits. Most
customers often don't complain as long they receive the
value for the price they are paying for products or
services.
Conclusion
Business Transformation is one of the key necessities if a
business is to remain competitive and continue to
deliver value to its customers.
 While middle-line is a key indicator of a company's
performance, it is the top-line that truly sets a
company apart from the rest
 As businesses have evolved, so has the usage of
enterprise solutions rapidly evolved with the focus
moving from middle-line to top-line
 Many companies across industries and geographies
are now investing in innovative solutions to drive
their top-line as most industries mature especially in
developed markets
 Services, especially Banking and Financial Services
continue to lead the pack with investments in
enterprise solutions to drive top-line
 Emerging economies are actively investing in
technology due to lesser burden of legacy systems
and the urge to establish themselves globally
 This transformation requires a vision driven by the
top management and well managed by middle
management to truly deliver the value they seek
References
1. Australia's Banking Industry – Australian
Government & Trade Commission

2. P2P lending market value - Morgan Stanley
3. The Australian Mortgage Report 2014 – Deloitte
Australia
4. Overhauling banks’ IT systems – McKinsey &
Company
5. Top ranked Tech innovation priorities - Ventana
Research, 2014
6. Pharmaceutical emerging markets 2.0 : How
emerging markets are driving the transformation of
the pharmaceutical industry – Strategy&
7. Top ranked Tech priorities for Enterprises - Gartner,
July 2014
8. Core Banking Solution (CBS) IT Modernization
Project – India Post
9. The rise of the digital bank – McKinsey & Company
10. Overhauling banks’ IT systems – McKinsey &
Company
11. Customer Stories – Salesforce
12. Trillion-Dollar Alternative Lending Industry Is A VC
Gold Mine – TechCrunch
13. How Digitization Is Creating a Fork in the Road for
Banks – Center for Information Systems Research,
MIT
14. The top line is the bottom line in insurance – Bain &
Company
15. How Big Data Can Revolutionize Pharmaceutical
R&D – McKinsey

Contact Details
Arup Das
Lending Product Head (P&L Management), Nucleus Software
Arup is the Vice President and Lending Product Head (P&L Management) at
Nucleus Software where he is responsible to lead the flagship product to the
next level of global leadership. Before joining Nucleus, he has played various
roles in strategy and product management with leading companies like
CISCO, IPValue and Mphasis.
Author e-mail id: arup.das@nucleussoftware.com
Shivendu Shekhar Mishra
Lending Product Manager, Nucleus Software
Shivendu is a Product Manager with Nucleus in Noida office. Shivendu is an
MBA from Great Lakes Institute of Management with dual majors in
Marketing and IT/Operations. His undergraduate degree is Bachelor’s in
Computer Engineering.
Before joining Nucleus, Shivendu worked in Product Development &
Management, Business Consulting roles with companies like Infosys, CSC and
ZS Associates. As Product Manager, Shivendu’s major focus is to understand
latest business needs and opportunities in Lending market. This is in line with
Nucleus’ philosophy of being driven by strong customer insights and
innovation.
Author e-mail id: shivendu.mishra@nucleussoftware.com
Avinash Devulapalli
Lending Product Analyst, Nucleus Software
Avinash is a Product Analyst at Nucleus Software in the Product Management
Team of its Enterprise Lending Applications. Avinash is a PGDM holder from
IIM Kashipur with dual majors in Finance and Marketing. He pursued
Bachelors in Electronics & Computer Engineering.
Prior to post graduation, he worked with Cognizant Technology Solutions as a
Programmer Analyst in the Banking & Financial Services domain. As Product
Analyst, Avinash is currently responsible for Market research, Competitive
Analysis, Product Marketing and Product Requirement analysis to help
Nucleus develop new business and market models to drive next level of
growth for its Lending products.
Author e-mail id: avinash.devulapalli@nucleussoftware.com

Gautam Mahesh
Lending Product Management Trainee, Nucleus Software
Gautam Mahesh is a Management Trainee in Product Management with
Nucleus Software, Noida. Gautam is a PGDM holder from Management
Development Institute Gurgaon with dual majors in Marketing & Finance. He
interned with Aviva Life Insurance Ltd. in Operations and Governance. He has
an engineering background in Electronics & Communication.
Prior to his post-graduation, he has worked with TCS in Presales, Project
Management & Development in Banking & Insurance space. At Nucleus, he
works with flagship lending product FinnOne Neo and Business Analytics
suite in Product Management space. He loves keeping himself abreast of
latest technology in BFSI space. He is an avid gamer and a bibliophile
Author e-mail id: gautam.mahesh@nucleussoftware.com

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