The first six months involved settling down, and in September I started this firm called ARX Analytics, to do credit focused outsourcing work for banks. But as I spoke to potential mid-tier Asian and Middle Eastern banking clients they said that while they liked the idea of industry and peer group credit comparisons, their own portfolios mainly comprised SMEs so some of the banks suggested we convert it to a software. They could then run their own SME portfolio data base to do exactly what we were doing.
So we split the business. One part was the original outsourcing idea for which we have started work for some clients, and the other was software development. In building this software, I thought back to my days at Citi and HSBC. In my opinion there is no really good client relationship management software that incorporated all aspects of client management: from call memos to company information reports, to account plans, all the way to credit approvals, credit rating and analytics. So we have busily been developing that over the past year, and we now have it. It has two modules: one deals with client interaction, and the other with credit, risk and financial analytics. The latter does the credit approval requests, the credit memos, and the links to analysts reports and a financial engine which does the financial analytics û including industry comparisons. In fact, the software allows you to create your own peer groups and analyse the clientÆs credit against these peer groups using up to 150 ratios.
Is it similar to software that your former employers HSBC and Citi would use, or is it an improvement even on what they have got?
I like to think to think it is a considerable improvement. ThatÆs because most client relationship software is call memo-centric, whereas we integrate the credit aspect. It is a web-based system which encompasses relationship management, product pitches, credit memos and financial analytics ,credit rating model , and has links to news feeds and analyst reports.
What do you mean by call memos?
ThatÆs when you call on the client and the relationship manager or investment banker writes up what was discussed, what are the opportunities and who will follow up. A copy of this gets sent to the treasury guys, for example, and they follow up.
We have built templates û that can be modified according to the bankÆs need û so that these memos drop down and there is a list of names it can be sent to, and it automatically goes to that list. It is action-based, meaning people have to respond; and if no one responds they get a reminder saying ôYou were supposed to do thisö and so forth.
But you are saying the real improvement of your software is the way it also integrates credit?
Yes, it integrates credit, and all aspects, such as account plans. You know each year most institutions build their budgets from asking the relationship managers how much they will make from each account. That becomes his revenue budget and if there are 50 in a branch, that becomes your revenue budget for that location. And you gradually build from the bottom up to get a budget for the whole institution. So this can help with this process.
All the information, including credit is filed digitally on a bankÆs own servers. You pull down the template, you write in the credit application û it shows what the limits were last year and this year. The risk manager is also able to view the limit for his entire portfolio by account, by product, by industry or by region, or even globally.
In terms of the Asian banks you are targeting, how big is the market?
The market is huge since this is a system which can be used by both large and mid-tier banks. For large banks we can even help them populate their database of publicly listed companies and for the smaller SME banks they can use the software for their own database. For the SME banks we are also developing a lead tracking module that allows you to track an SME relationship right from the cold call to why deals didnÆt happen. It has the flexibility of generating multiple reports tracking the productivity of the relationship manager and why a potential transaction did not happen. Did it get turn down by credit and for what reason? That way you can monitor the performance of the entire team. We are also developing a credit rating module. Both of them should be ready in about three monthsÆ time.
What about the systemÆs own security?
It is a web-based system, but is password controlled and there is an audit trail of who has accessed which modules and what changes were made. Certain areas are off limits; for example, the equity guys couldnÆt access the credit information.
Are banks going to be comfortable allowing this information outside of their systems?
Actually, everything stays on their own centralized servers, so it doesnÆt leave their system. We are selling them the software which pulls together all information relating to the bankÆs relationship with a client.
When did you complete the software?
We finished it about a month and a half ago (except for the lead tracking module and the credit rating module) and have been showing it to banks. They have come back with feedback about additional features they would like said they will then take it to senior management. Something like this has to have a buy-in from credit, from the corporate bank, and from the product teams. All three parties are users of the software. And thatÆs what takes a bit of time, because you have to get all three parties on board.
WhatÆs the revenue model?
You can buy the software upfront. But increasingly the software world is moving to software as a service approach. So you can pay for it on a monthly basis depending on how many users there are. Either way is fine from our perspective.
What sort of efficiency gains do you think banks will gain from using this versus their existing systems?
In large institutions û in my experience û the product managers go and talk to the customer and in a lot of cases, the relationship manager is not aware till the last minute û and is then told that an approval is required tomorrow, because I want to send the customer a proposal. Using the software, the deal guy is forced to immediately write something that goes to the relationship manager û who will see it even if he is travelling.
Again, based on my experience, I know that the more complicated you make the software the less likely people are going to use it. We have tried to make this as easy to use as possible, with pull-down templates. ItÆs like the old video recorder. More than 80% of the people just pressed two buttons: record or play.
And look at this software from the relationship managerÆs point of view. When he does the credit review for the company, he will be able to do compare the company not just against other domestic companies but against other global peers. At present when the risk manager asks for this, the relationship manager has to do this manually. Ours keeps all that sort of information on your database. For example, you can look at peer group data for telecoms firms. ItÆs easy, you just press select, and it comes out as an Excel spreadsheet or in a graphical format, to show a trend. This enables the relationship manager to talk about the financials more intelligently. And by taking out the manual processes, it makes him more efficient. It saves him a lot of time û at one bank I worked at, a study showed that around 25%-30% of a relationship managerÆs time was spent on such number crunching. So while this software wonÆt eliminate number crunching totally, I estimate it will reduce it by 50%-60% or more û because it is all automated and in your database.
There are other advantages in terms of keeping track of what has been pitched to the client. On the product side in the investment banking area, there is a reasonable amount of turnover and most pitches are kept on laptops or desktops. So when someone leaves, the tech team clears the hard disk and in a lot of cases, the only copy of a pitch will be deleted. So you lose a lot of historical institutional information. By having all of it kept in a central server, you have institutional memory. Hence you know what was and wasnÆt discussed with customers, what was pitched and what they were and werenÆt interested in û and why it was turned down, for example.
So you obviously think this software will do well?
I am pretty bullish about it. Obviously I am biased. But from what I have seen, I donÆt think there is anything like this in the marketplace. We are also in the process of incorporating a feature which will enable you to select a language û initially Japanese, Korean or Chinese and gradually add on other languages as well.
Having spent 30 years in both the corporate and investment bank I have tried to develop this software totally from a userÆs perspective rather than having a lot of technical whiz bang which no one uses.
¬ Haymarket Media Limited. All rights reserved.
