Digital Banking 2030 FELABAN November 7, 2016

Guillermo Kopp Worldwide Financial Services Industry Director

Digital is driving massive demand for transformation in financial services

2

MANAGING THE REALITIES OF RISK, REGULATION, LEGACY SYSTEMS, AND COST PRESSURES

DELIVERING INNOVATIVE CUSTOMER AND EMPLOYEE EXPERIENCES WITH

SPEED AND AGILITY IT budgets are currently required to keep the lights on (Source: Celent)

(Source: Capgemini)

50% of Gen Y

> 15% customers

>

(Source: The New Yorker, May 16, 2016)

FINANCIAL COMPANIES

ACCOUNTING FOR US CORPORATE PROFITS

LIKELY TO LEAVE THEIR BANK IN THE NEXT

SIX MONTHS Top reasons:

Ease of use and service

Paid in bank fines since 2009 (Source: Morgan Stanley)

$280B

~70% of

17% 30%

Before 2009 By 2015

80% of bank customers prioritize online

and mobile functionality (Source: Wall Street Journal

June 3, 2016)

80% of customers would switch to a insurer that provided personalized service (Source: Accenture)

Driving Digital Transformation in Financial Services Threats perceived by financial institutions

TECH COMPANIES

STARTUPS

TELCOS

RETAILERS

BANKING LOANS & CREDIT

INSURANCE

INVESTING AND RETIREMENT

WEALTH MANAGEMENT

Source: EFMA-Infosys Feb 2015 Digital Banking Report

BLOCKCHAIN

“There are hundreds of startups with lots of brains and money working on various alternatives to traditional banking.“

Jaime Dimon, CEO, JP Morgan Chase

2/3 of customers globally Are using FinTech product or services. Bankers underestimate the impact of FinTech firms on their customers.

Traditional banking customers seek

more personal or tailored solutions …and are happy to consider

alternatives to traditional banks. (Source: Gartner)

44% of banks report that

improving user experience is their

top priority2

Consumer expectations are being shaped by customer experience leaders outside of banking

1. 2016 Capgemini world banking report, April 2016 2. Derek Corcoran, Digital Business Banking Trends in 2016, Avoka, March 31, 2016

Digital transformation is essential to sustaining a competitive advantage

5

ENGAGE YOUR CUSTOMERS

with compelling experiences across

all channels

EMPOWER YOUR EMPLOYEES

to drive customer intimacy and be digitally astute

OPTIMIZE YOUR OPERATIONS for efficiency,

compliance and risk management

TRANSFORM YOUR PRODUCTS

to unlock new revenue opportunities and achieve growth

Busi

ness

Agi

lity

Cost Take Out

Risk Compute

Core Systems

Storage & Back-up

Dev/Test Cloud Platform

Production Cloud Infrastructure

Productivity Applications

>80% of new apps in the next 5 years will be distributed/deployed on clouds

from infrastructure to application platforms

The strategic focus in the cloud will shift

34% of CIOs say technology as a service (cloud) will have the most profound effect on the CIO role in the future

Business IT

Mobility

Digital Marketing

Big Data/ Machine Learning

Internet of Things/Devices

Blockchain as a Service

Market Data/Analytics

Blockchain is a secure, shared, distributed ledger

Secure

Distributed

Ledger

Standby Letter of Credit (SBLC) - Current State Overview

Microoft Treasury

Agrees to Buy

Requests SBLC

Provides SBLC Terms

Accept Terms and Provide Issuing Bank

Details

Validates and Approves Issuing Bank

Submits Application Sends SBLC

Sends SBLC

Reviews SBLC for Treasury Processing

Tracks security to expiration date so long as customer maintains payment schedule. If customer defaults, pursues claim with Advising Bank.

Initial Contract Negotiation

Initial Contract Negotiation

Inform Advising Bank in case of Customer default

Amendment Negotiation

Amendment Negotiation Forwards

Amendments

Resends SBLC

Reviews SBLC Again for Treasury

Processing

SBLC New Process Flow - Distributed Ledger

1. Applicant agrees to transact with Beneficiary via SBLC

5. SBLC activated with expiration date; transaction complete

2. Applicant submits SBLC request to the ledger

3. Applicant bank issues SBLC

4. Beneficiary bank reviews and advises SBLC

Blockchain-enabled Digital Transformation - Benefits

Improves process speed, efficiency and effectiveness

Shifts operating model from transactional to relationship driven

Enhances multi-party transparency

Lowers adoption barriers

Together, with a growing number of partners, we have developed an open ecosystem in a secure environment supported by Azure.

Azure More partners every day!