Smarter Digital Banking

Smarter Digital Banking:

Leveraging New Capabilities

with Big Data

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Featured Presenter

Our speaker today is:

Marc Andrews Vice President,

Global Big Data Industry

Team,

IBM

© 2012 IBM Corporation

Smarter Digital Banking

Using Big Data to Transform the Banking Experience

Agenda

• Market Forces Driving Action

• The Future of Digital Banking

• Pursuing Next Generation Capabilities

5

Banks must continue to

deliver new, innovative digital

services and pursue alternative

revenue streams

Market Forces Dictate Action

6

Continued margin

pressures and

reduced profitability

in traditional banking

products

Other banks have

plans to deliver

enhanced mobile

and online

capabilities Large threat of

disintermediation

by non-traditional

financial service

providers

…Executives at New York-based JPMorgan expect low rates and

the resulting margin compression to cause a $400 million decline in

consumer and business banking net income this year…

…profit margins in Europe’s banking industry will remain under pressure as

the sovereign debt crisis curbs client activity and competition increases.

Pressure on margins and higher capital requirements “are the new normal.”

…intense competition and low interest rates are causing margin pressure

that will likely further erode the banks' already-weak

revenues and profits over the 12-18 month outlook

period…[one of] the main drivers of the outlook are margin pressure for

banks, owing to intense competition, low interest rates and limited loan

growth…

As a result of new global, regional, and national regulations, and

absent any mitigating action by banks or material changes in the

economic and competitive environment, return on equity for

retail banking Europe’s four largest markets is

expected to fall on average from about 10 percent to

6 percent, a decline of 41 percent…But individual banks can

rebuild ROE…substantial business-model realignment is

the single most important lever.

Mobile Innovation Plans Online Innovation Plans

Mobile is the deciding factor when switching banks

7

• Mobile banking adoption expected to approach 50% by 2016

– Was 15% in beginning of 2012

– Between age 18-34: 30%

– Between age 35-54: 15%

• 39% say mobile offerings were important in their decision to switch banks

• Mobile banking users who switched banks in the past year:

– 32% chose mobile banking as preferred attribute

– 24% fee level

– 21% branch convenience

– 21% customer service

– 9% deposit rate

• Opportunities for differentiation are opening for banks

Source: Alix Partners, http://www.alixpartners.com/en/MediaCenter/PressReleaseArchive/tabid/821/articleType/ArticleView/articleId/203/Smartphones-Rapidly-

Transforming-Mobile-Banking-From-New-Concept-to-Tablestakes-According-to-AlixPartners-Study.aspx, Feb 22, 2012

For customers already using mobile banking, mobile banking features are the

most important deciding factor (32%) when switching banks, more

important than fee (24%) or branch location (21%) or services (21%)

http://www.alixpartners.com/en/MediaCenter/PressReleaseArchive/tabid/821/articleType/ArticleView/articleId/203/Smartphones-Rapidly-Transforming-Mobile-Banking-From-New-Concept-to-Tablestakes-According-to-AlixPartners-Study.aspx




























8

Drive outbound communication

and interaction when “customer”

considers valuable –

relevant, timely and helpful

Key Capabilities That Must Be Considered

Provide new services that extend beyond

traditional banking to help customers

make the most of their time and money

Access core banking services

from anywhere, anytime

with an ease that delights

integrated across all channels

9

CUSTOMER JOURNEY Part 1

Pierre, a native Parisian, goes out shopping one Saturday

powered by

10:00 AM Bouygues3G

OFN

1

OFN – Could you use more

spending money?

You’ve been pre-approved for a credit line

increase – would you like to learn more?

Cancel OK

powered by

10:01 AM Bouygues3G

Current Balance: €11,237

Current Line: €15,000

New Line: €20,000

Accept No, thanks

OFN Offers

You have been pre-approved for a €5000

increase in your credit line at your current

interest. Just click “Accept” now and

access additional funds immediately.

If you accept, you will receive 60 days

interest free payments on any purchases

made in the next 12 hours.

powered by

10:48 AM Bouygues3G

OFN

1

OFN – Save Receipt?

We noticed you recently made a significant

purchase – would you like to save the

receipt?

Cancel OK

powered by

10:49 AM Bouygues3G

Digital Vault Cancel

New LED TV Label:

Add to Home Inventory? YES

Add New Receipt

Take Photo

powered by

11:30 AM Bouygues3G

OFN

1

OFN – Lunch Offer

We found a great deal on lunch at a

nearby restaurant, would you like to

take a look?

Cancel OK

powered by

11:31 AM Bouygues3G

OFN Offers

Highlights Details Map

powered by

11:32 AM Bouygues3G

OFN Offers

Highlights Details Map

30% off any entrée over €30

30% off

30% off any entrée over €30

Just present this offer and barcode to the merchant and pay with your OFN

card to redeem.

Bon appetite!

Data Monetization Opportunity via Mobile

17 Source: Consumers and Mobile Financial Services, Federal Reserve System, Mar 2012

What consumers are interested in using their mobile phone for

Biggest gap

Source: The CMO Site, Getting the Most from Mobile Marketing

powered by

12:58 PM Bouygues3G

Payments Logout

Mobile check deposit

Order foreign currency

Pay merchants

Mobile & Email payments

Facebook

friend payments

powered by

12:59 PM Bouygues3G

Make a Payment Logout

TAP TO EDIT AMOUNT

€ 70

Payee Guillaume Audebert

+33 6 23 44 87

Message For train ticket to Geneva

Send Payment

+ €5 + €10 + €20 + €50

powered by

1:06 PM Bouygues3G

Payments Logout

Mobile check deposit

Order foreign currency

Pay merchants

Mobile & Email payments

Facebook

friend payments

powered by

1:07 PM Bouygues3G

Mobile Deposit Logout

Camera

Make sure the entire cheque is inside the blue box and

touch the “Take Photo” button when you are ready

Take Photo

powered by

1:07 PM Bouygues3G

Mobile Deposit Logout

Deposit Details

Deposit

to OFN Current Account

Amount 70,00

Currency Euro (€)

Make Deposit

23


Pierre travels to Geneva for the weekend

powered by

11:21 AM Swisscom3G

OFN

1

OFN – Fraud Warning

We noticed unusual activity just now on

your OFN card. Please click OK to confirm

the transaction or alert us.

Cancel OK

powered by

11:21 AM Swisscom3G

OFN

1

Please Enter Your Pin

Cancel OK

* * *

11:22 AM Swisscom3G

Fraud Alerts Logout

Account Number: 12345678

Sort Code: 11-22-33

An attempted charge was made in Switzerland

(Watch Emporium). Please approve or reject the

transaction.

powered by

Reject Approve

Please let us know how long you will be in

Switzerland:

Call

2 days 6

Inform us

Call Me

Mobile Payments

27

2010 2011 2012 2013 2014 2015

North America $4.3 $14.2 $30.2 $53.8 $80.4 $109.4

Worldwide $58.9 $105.9 $171.5 $255.8 $352.7 $472.8

2010 2011 2012 2013 2014 2015

North America 105 347 736 1,261 1,934 2,694

Worldwide 2,007 3,580 5,707 8,468 11,806 15,993

Mobile Payment Transaction Volumes (millions of transactions)

Mobile Payment Transaction Value (billions of dollars)

Source: Gartner, “Forecast - Mobile Payment, Worldwide 2009-2016”, May 2012

Transaction value and volumes expected to grow in

North America by more than 3X in next 3 years

Hana Bank – Mobile Wallet for Everyone

28

Multiple Money Transfer Options

Direct Purchase or Mobile Gift Certificate

(15K+ stores)

• Balance

• Top Up

• Send/Receive

• Dutch Pay

• Wheel of Fortune

• Give Allowance

• Remote ATM Withdrawal

Includes non-Hana Bank account holders & unbanked customers

Cell phone number as a bank account

Online transfer or ATM to top up balance

29


Pierre spends a lazy Sunday morning at home reviewing his finances

10:00 AM iPad

OFN

3

10:00 AM iPad

OFN – Virtual Branch

Talk or chat with us now…

Accounts

Digital Vault

Payments & Transfers

Financial Manager

Spending Manager

Locator

Alerts 3

Jul 2, 2012 4:10 PM CET

Based on our analysis of your typical

spending, you may not have

sufficient funds in your current

account.

Jul 2, 2012 5:30 PM CET

New – OFN Charitable Saver is now

available in France.

Jul 2, 2012 7:30 PM CET

Based on comparison with your

communities, you may be able to

save money on your utility bill.

powered by

10:00 AM iPad

Video Conference Talk to Agent Chat

7 available now

3 available now

2 minutes


Accounts

Digital Vault


Locator

Alerts 3

Jul 2, 2012 4:10 PM – You may not have sufficient funds in your current account

Recent spending

Based on our analysis of your typical spending, you may not have sufficient funds in your current account. We’ve reviewed

what others have done to come up with some suggestions about how we can help you resolve this situation – please click on

an option below to find out more, or feel free to contact us directly to discuss.

Date Merchant Location Amount Available Balance

03/07/12 15:30 Watch Emporium Geneva, Switzerland - 2895,00 € 3431,90

02/07/12 13:00 Villa Spicy Paris, France - 150,00 € 6326,90

02/07/12 11:00 Fnac Paris, France - 1023,10 € 6476,90

Recommendations based on your peer group and communities

Your typical non-discretionary monthly spend:

Remaining current account balance:

€ 4500,00

€ 3431,90

OFN Smart Sweep Personal Loan Overdraft

Financial Manager

Spending Manager

Jul 2, 2012 4:10 PM CET




account.

Jul 2, 2012 5:30 PM CET



Jul 2, 2012 7:30 PM CET





74% of

peers

13% of

peers

25% of

peers

powered by

10:02 AM iPad

Accounts

Digital Vault


Locator

Currently chatting with Paul Bellanti…

Video chat with Customer Service Back End Call

Financial Manager

Spending Manager

Alerts 3

Jul 2, 2012 4:10 PM CET




account.

Jul 2, 2012 5:30 PM CET



Jul 2, 2012 7:30 PM CET




OFN – Virtual Branch powered by

10:01 AM iPad

Accounts

Digital Vault


Locator

Apply New Balance Limits

Financial Manager

Spending Manager

OFN Smart Sweep Back

Minimum balance: € 4500,00

• If the balance in your Linked Cash Account drops below this amount, money will be automatically transferred

from the Linked Excess Account in order to maintain the minimum balance.

Maximum balance: € 7500,00

• If the balance in the Linked Cash Account exceeds this amount, the amount in excess will be automatically

transferred to the Linked Excess Account

€ 4500,00

€ 7500,00

Change Linked Accounts

OFN Current Account


Sort Code: 11-22-33

Linked Cash Account

Direct Savings


Sort Code: 11-22-33

Linked Excess Account

Alerts 2

Jul 2, 2012 5:30 PM CET



Jul 2, 2012 7:30 PM CET




OFN – Virtual Branch powered by

Currently chatting with Paul Bellanti…

Alior Bank – Launching a Virtual Bank

35

Virtual Branch interface provides

online teller interaction… New brand created

for “Virtual Bank”

…virtual teller can assist

with transactions

Mobile app enables customers to

take pictures of bills…

…and electronic payment is

automatically generated

Global Banking

Innovation Award

10:01 AM iPad

Digital Vault


Locator

My Views

Spending Manager

Accounts


My Wall 1

powered by


OFN Personal Loan Form Close Send

Personal Information Calculate and Review Confirm and Submit

Jul 2, 2012 5:30 PM CET

You qualify for a special rate on an

OFN Secured Personal Loan

powered by

Pierre

PIERRE

RUPERT

M

10:01 AM iPad

Digital Vault


Locator

My Views

Spending Manager

Accounts


My Wall 1

powered by


OFN Personal Loan Form

Pierre Rupert

123-45-6789

14/05/1964

(647) 555-1212

(416) 555-1212

[email protected]

IBM

14/05/2002

€250,000

Close Send

Personal Information Calculate and Review Confirm and Submit

Jul 2, 2012 5:30 PM CET



10:01 AM iPad

Digital Vault


Locator

My Views

Spending Manager

Accounts


My Wall 1

powered by


OFN Personal Loan Form Close

Personal Information Calculate and Review

Send Back

Confirm and Submit

€30,000

Jul 2, 2012 5:30 PM CET



10:01 AM iPad

Digital Vault


Locator

My Views

Spending Manager

Accounts


My Wall 1

powered by


OFN Personal Loan Form Close

Confirmation and Agreement

Back Send

Jul 2, 2012 5:30 PM CET



10:05 AM iPad


25%

10% 15% 20% 15%

15%

Mortgage

Utilities & insurance

Food & Drink

Entertainment

Travel

Other

My Average Monthly Spending

0%

5%

10%

15%

20%

25%

30%

35%

Mortgage Utilities & insurance

Food & Drink Entertainment Travel Other

Monthly Spend vs Peer

Average Spend

Peer

My Communities +/-

Forecasting / Planning

Average Monthly Spending

Budget Planning

Current Spend vs Budget

Accounts Timeline

Payments Map

Auto-Profile

Advanced Profile

Doctors

Spending Alerts

Jul 2, 2012 7:30 PM CET

Based on comparison with

your communities, you may be

able to save money on your

utility bill.

1

Recent Transactions

Date Merchant Amount

03/07/12 Watch … -2895,00

02/07/12 Villa Sp… -150,00

02/07/12 Fnac … -1023,10

02/07/12 Monopr… -347,48

01/07/12 Boulan… -315,24

01/07/12 Paul … -5,74

01/07/12 Airbus … 14 231,00

30/06/12 Café R… -2,88

30/06/12 Patisse… -32,33

28/06/12 Moulin … -149,83

Top Merchants

1. Nina Ricci

2. Preen

3. Helmut Lang

4. Miu Miu

5. Emilio Pucci

6. Roberto Cavalli

7. Dolce & Gabbana

8. Prada

Category

OFN – Spending Manager powered by

10:15 AM iPad

Jun 26, 2012 1:45 PM CET

Italian, Spanish Government

Notes Slide on Debt Sales as

German Bunds Drop

Jun 26, 2012 1:12 PM CET

Oil Trades Little Changed as

Storm Threat to U.S. Gulf Crude

Supply Fades

Jun 25, 2012 10:59 PM CET

BRICs Biggest Currency

Depreciation Since 1998 to

Worsen


News Feed +/-

My Communities +/-


Investment Activity +/-

Company Last

Trade

Position

AAPL 347.48 +1.92

BAC 315.24 -2.20

CGREN 5.74 -0.04

CRDA 2.88 +0.16

ERJ 32.33 +2.31

IBM 149.83 +1.01

MERR 2.85 -1.20

SLV 18.70 -4.12

My Portfolio

Portfolio Performance

Asset Allocation

Return Calculator

Retirement Calculator

Investment Research

Auto-Profile

Advanced Profile

Doctors

Research Alerts

Jul 2, 2012 7:30 PM CET

OFN Research has just

released a new report on

Apple…

1

OFN – Financial Manager powered by

0

50

100

150

200

250

300

May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12

Value of My Portfolio vs Advanced Peers (Start of period = 100)

0

500

May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12

Value of My Portfolio (Start of period = 100)

My …

10:15 AM iPad

Jun 26, 2012 1:45 PM CET

Italian, Spanish Government

Notes Slide on Debt Sales as

German Bunds Drop

Jun 26, 2012 1:12 PM CET

Oil Trades Little Changed as

Storm Threat to U.S. Gulf Crude

Supply Fades

Jun 25, 2012 10:59 PM CET

BRICs Biggest Currency

Depreciation Since 1998 to

Worsen


News Feed +/-

10%

20%

30% 15%

20%

5% Cash

Stocks & Shares

Gilts & Bonds

Structured products

Funds

My Asset Allocation

0%

5%

10%

15%

20%

25%

30%

35%

Cash Stocks & Shares

Gilts & Bonds

Structured products

Funds ETFs

Holdings vs Advanced Peer

Current Holdings

Advanced Peer

Investment Activity +/-

Company Last

Trade

Position

AAPL 347.48 +1.92

BAC 315.24 -2.20

CGREN 5.74 -0.04

CRDA 2.88 +0.16

ERJ 32.33 +2.31

IBM 149.83 +1.01

MERR 2.85 -1.20

SLV 18.70 -4.12

My Communities +/-

Auto-Profile

Advanced Profile

Doctors

Research Alerts

Jul 2, 2012 7:30 PM CET

OFN Research has just

released a new report on

Apple…

1


Portfolio Performance

Asset Allocation

Return Calculator

Retirement Calculator

Investment Research

OFN – Financial Manager powered by

Banks Trying to Help Customers Save More Money

44

Citibank and Mint.com Provide Spending Categorization via Tablet Apps

SmartyPig and Erste Bank Provide Special Apps to Drive Savings

Pursuing Next Generation Capabilities

45

46

Digital Centric designed to operate branch-free and

contact-center-lite to minimize

impact on existing infrastructure

Agile Development

Data Driven

enabling phased delivery of new

functionality in small incremental

cycles, leveraging existing

infrastructure and capabilities

to ensure communications and offers

are relevant to customers and

deliver added value

Delivery Requirements for Success

Smarter Digital Banking – Technology Conceptual

47

Core Banking Systems

Rapid Development & Integration

Enterprise Service Bus

Business Analytics

Channel Integration

Platform

Marketing Mgmt

Data Analytics

Payments

External Payment Gateway

Big Data & Analytics

Core

Systems &

Processes

Payments &

Commerce

Multi-Channel Consumer

Applications

Infrastructure & Development

Se

cu

rity

Smarter Digital Banking – Technology Descriptive

48




Business Analytics

Channel Integration

Platform

Marketing Mgmt

Data Analytics

Payments


Big Data & Analytics

Core

Systems &

Processes

Payments & Commerce Multi-Channel Consumer

Applications

Infrastructure & Development

Secu

rity

• Data Aggregation

• Master Data Management

• Advanced Analytics

• Campaign and Offer Management

• Process and Rules Management

• Performance Management

• Customer Experience Management

• Data Access

• Personalised Content Delivery

• Secure, Real-Time, Two-Way

Communication

• Client Reporting

• Content Management

• Collaboration & Community Services

• Electronic Forms / Signature

• On-Demand Scalability (Platform as a Service)

• Multi-Device Mobile App Framework • Diverse Device Testing

• Endpoint Management (Apps and Devices)

•A

uth

entication

•A

uth

orization

• Payment Gateway

• Wallet

• Baskets & Order Management

• Development Lifecycle Management

Smarter Digital Banking – Technology Logical

49


Infrastructure Management, Monitoring & Governance



Collaboration Services

Business Analytics

Channel Integration

Platform

Marketing Mgmt

Process and Rules

Mgmt

3rd party Data

Mobile Application

Security Services

Data Analytics

Commerce

Payments


Data Mgmt

Smarter Digital Banking – Technology Components

50


Infrastructure Management, Monitoring & Governance



Mobile

Com

munic

atio

n

Managem

ent

Deposits

Card

s

Loans

Wealth

Collaboration Services

Secure, Real-Time, Two-way

Communications

Community Collaboration

Services

External Connectors

Business Analytics

Campaign Insight

Business Insight

Predictive Analytics

Fraud Analytics

Performance Management

Web & Mobile

Experience Analytics

On-Demand Scalability (Platform as a Service)

Hybrid Integration – Cloud & On-Premise

Endpoint Management, Monitoring & Reporting

Multi-Device Mobile App Development Framework

Diverse Device Testing Collaborative Development

Lifecycle Management

Channel Integration Platform

Common Data

Repository

Common Channel Services

Data Handlers

Data Transformers

Data Mappers

Service Invokers

Presentation Services

Data Caching

Marketing Management

Campaign Mgmt

Campaign Scheduling

Campaign Delivery

3rd party Data

Demographic

Credit Scores

Geographic

Weather

Social Media

Secure, Real-Time

Comms

Community Collab.

Services

Local Connectivity

Support

Context Mgmt

Wallet Notifications

Local Analytics

Mobile Application

App Mgmt

Native Device

Features

Credential Store

Secure Database

Skin-able Reference Applications

On-Device Caching

Location Data

Collection

Audio / Video Chat

Augmented Reality

Security Services

Authentication

Authorization

Biometrics

Data Analytics

Text Analytics

/ NLP

Image Recognition

Content Analytics

Commerce

Product Catalog

Shopping Basket

Order Management

Data Management

Master Data Mgmt

Warehouse

Information Integration

Operational Data Mgmt

Content Managemen

t

Exploratory Data Mgmt

Information Lifecycle

Governance

Payments


Wallet

Financial Network

Connectors

Core Banking Connectors

Service Mgmt & Invocation

Service Registry & Repository

Oth

er(

s)

General Ledger

Process and Rules

Management

Business Rules Engine

Process Models

Business Process Manager

Event Detection

Electronic Forms

Electronic Signature

Value Tree for Benefits of Smarter Digital Banking

51 Indirect/qualitative measure Key Direct/quantifiable measure

Direct profit impact of smarter

digital banking capabilities

Profit/Margin Expansion

New revenue sources enabled by smarter digital

banking

New Revenue

New cost reduction opportunities enabled by smarter digital banking

Cost Reduction

Transaction fees

Additional services to third-parties

Additional services to end-users Other margin

expansion opps

PTI

Cross sell existing products

New customer acquisition

Increase of assets under management

Brand benefits (marketing)

Other Benefits

Other indirect benefits enabled by smarter digital

banking

Social impact

Reduction of average transaction cost

Reduction of client loss rate

Reduction of expansion cost

Support of government agenda

Potential Ways to Get Started

• Establish Vision and Priorities

o Consider business model and digital capabilities

• Assess Current Capabilities and Gaps

o Data and technology required to deliver capabilities

• Develop a Roadmap

o With phased delivery and supporting business case

• Prototype/Pilot Selected Use Cases

52

Questions?

Submit questions to the presenter via the on-screen text box

Marc Andrews Vice President,

Global Big Data Industry

Team,

IBM

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Smarter Digital Banking: Leveraging New

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new-capabilities-big-data

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Smarter Digital Banking