The implications of six key technology trends in financial service institutions

Larry Ryan
The implications of six key technology trends in financial service
institutions

© Copyright 2012 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice.

The implications of six
key technology
trends in financial
service institutions
i i tit ti

Larry Ryan
June 7, 2012
7
© Copyright 2012 Hewlett-Packard Development Company, L.P.
The information contained herein is subject to change without notice.

Increasing pressure on financial firms
Customer experience:
agility to retain and grow market share

Shareholder Demand:
cost control & operational efficiency

Increasing regulatory scrutiny:
I i l t ti
greater levels of transparency

Sop st c te cyber tt c s
Sophisticated cybe attacks:
secure infrastructure, data & apps

Financial System Soundness:
Capital, quality, liquidity, & risk

3 © Copyright 2012 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice.

Increasing pressure on financial firms
Top Bank Efficiency Raio and ROE
Customer experience: 100

agility to retain and grow market share
80

Shareholder Demand:
cost control & operational efficiency 60

Increasing regulatory scrutiny:
I i l t ti 40

20

Sop st c te cyber tt c s
Sophisticated cybe attacks:
0

secure infrastructure, data & apps
‐20

Financial System Soundness:
Capital, quality, liquidity, & risk Efficiency Ratio ROE Source: www.bankregdata.com (2011Q4 Data)


Technologies impacting financial services
Focus on customer experience and agility
to retain and grow market share Cloud • Market place for Shared agile services

Shareholder Demand for cost and S it
Security • Pervasive end-to-end
operational efficiency

g
Big Data
Increasing regulatory scrutiny requires
• Derive meaning from the digital world

Social Media • The digital culture
Sophisticated cyber attacks require
stronger secure infrastructure
Mobility • Anywhere computing: markets, apps, payments

Improve soundness by increasing capital
and improving liquidity
di i li idit BYOD • Consumerization of IT


The digital life
2020 4B people online, 31B connected d i
2020: l li t d devices, 25M apps

Consumer CHANNEL SERVICES
CHANNELS

USER SECURITY SERVICES (SSO, Authorization and Access Control)
CHANNEL INTEGRATION
Professional
SERVICE SECURITY (Authentication, Authorization and Access Control)

BUSINESS SERVICES
CORE BANKING OPERATIONS
WEALTH
CORPORATE
MANAGEMENT
INFORMATION
EXTERNAL ENTERPRISE
MANAGEMENT &
INTERFACES SYSTEMS RETAIL TRADING
DATA SERVICES
RISK MANAGEMENT TREASURY & CASH
& COMPLIANCE MANAGEMENT

PLATFORM SECURITY (Authentication, Authorization and Access Control)

PLATFORMS

INFRASTUCTURE SECURITY

SERVICE SECURITY (Authentication, Authorisation and Access Control)
IT INFRASTRUCURE

HYBRID DELIVERY CLOUD

Mobile Datacenter


Source: IDC, ICT Outlook: Recovering Into a New World, #DR2010 GS2 JG, March 2010

The digital life: data
2020 4B people online, 31B connected d i
2020: l li t d devices, 25M apps

Transactions
Payments i l i
Social Interactions
Photos Personal
Movies/Videos Exhaust Data
Music Maps
M
Books Scientific Data
Life Footprint
Consumer Magazines Professional
Biological
CHANNEL SERVICES
CHANNELS

Newspapers
USER SECURITY SERVICES (SSO, Authorization and Access Control)
CHANNEL INTEGRATION

SERVICE SECURITY (Authentication, Authorization and Access Control)

BUSINESS SERVICES
CORE BANKING OPERATIONS
WEALTH
CORPORATE
MANAGEMENT

Environmental
INFORMATION
EXTERNAL ENTERPRISE
MANAGEMENT &
INTERFACES SYSTEMS RETAIL TRADING
DATA SERVICES

Art
RISK MANAGEMENT TREASURY & CASH
& COMPLIANCE MANAGEMENT

PLATFORM SECURITY (Authentication, Authorization and Access Control)

PLATFORMS

INFRASTUCTURE SECURITY

SERVICE SECURITY (Authentication, Authorisation and Access Control)
IT INFRASTRUCURE

HYBRID DELIVERY CLOUD

Public Records
Mobile Datacenter


Source: IDC, ICT Outlook: Recovering Into a New World, #DR2010 GS2 JG, March 2010

01 Cloud


Cloud computing types for financial service firms
Core attributes
Elastic
Pay-per-
Pay-per-use Banker
Networked
Shared
Trusted external On-
On-demand
service providers

Markets/Communities
Markets/Communities

Software Services (SaaS)
SaaS)

Platform Services (PaaS)
(PaaS)

Infrastructure Services (IaaS)
(IaaS)

How is it used? What is delivered?

The financial service marketplace evolves
NASDAQ
Market Replay

Expanding into
cloud services

Attacking legacy
business models
b i d l

Legacy Services
“Cloud” Services

Value of Cloud in FSI
Top challenges faced by banks
Manage recovery Grow customer base
Handle host of new & changed regulations Absorb acquisitions

Three key drivers for Cloud adoption
Cost reduction Speed to deliver Agility
Ovverall cost reduction through – With technology innovation becoming more of an Banks looking at Agility specifically with reference
• SaaS - Avoidance of infrastructure cost enabler of new banking products and channel to IaaS
• PaaS - Quicker development cycles innovations as well as increased regulatory Large-tier banks &"megabanks" have extremely
changes expected, a bank's ability to quickly adapt large sets of data and very high transaction
• IaaS - Increasing utilization of infrastructure
components reducing total infrastructure needs
to the changing landscape or become a market volumes in solution areas that are load-intensive
overall innovator by leveraging technology is a distinct
y g g gy and read-intensive such as risk management,
read intensive, management
competitive advantage trading algorithms, pricing, quantitative analysis
Enable banks to increase control over IT
infrastructure with regard to fixed vs. variable Cloud computing can offer faster initial and payments processing
costs and opex vs. capex implementations by eliminating the need for Megabanks are adopting or considering private
lengthy hardware acquisition cycles or capital cloud (internal to bank) IaaS to reduce overall
Flexibility and control over costs to react to what is
investment project reviews infrastructure cost through consolidation of
becoming an increasingly volatile economic
condition
diti servers,
servers data centers and higher utilization of their
server footprint
Source: Market Insight: The Impact of Cloud Computing on Vendors in Banking – Gartner June 2010

Key take-aways

1. Cloud is an emerging disruptive force; a strategic transformation and
journey
2. Cloud decreases time to market, increases agility, reduces cost, and enables
new business models
3.
3 Assess what assets can move to cloud and start with an internal IaaS as a
foundation towards a service ecosystem
4. HP recommends a hybrid delivery framework to integrate all sources and
automate
t t


02 Security


Top 5 global risks in terms of likelihood

Global Risks 2012 Seventh Edition, World Economic Forum,
http://www3.weforum.org/docs/WEF_GlobalRisks_Report_2012.pdf
14

The threat

• SWIFT: The operator of the world’s largest messaging network for financial
transactions said its communications systems are facing record levels of aggression
y g gg
from cyber hackers and attackers.*
• 38% of financial services respondents say they have been hit by cyber crime of one
sort or another. **
• Ponemon Institute found that >1 successful attack/week/company (44%
increase).***

* http://www.securitiestechnologymonitor.com/news/swift-terrorism-at-new-peak-shah-30120-1.html?zkPrintable=true
p // gy / / p
** Cybercrime: protecting against the growing threat, Global Economic Crime Survey, Nov 2011, PWC.
*** Second Annual Cost of Cyber Crime Study, August 2011, Ponemon Institue.


Example breaches

• Global Banks
• Community Bank
• Bank Outsourcer
• Exchange
• Payment Networks


HP’s framework
Information security management
Security Security
Compliance and Threat & Risk Security Training and
Supplier Policy and Risk Performance
Audit Management Architecture Awareness
Management Management

Security operations
Risk Accreditation & Identity and
Monitoring and Universal Log Incident Security Change
Assessment and Acceptance Access
Alerting Management Management Control
Mitigation Testing Management

Data center Network Application End-point

Data & Content Security Securing Data in Motion Securing Data in Use Securing Data at Rest

Business Recovery &
IDS/IPS Application Delivery Mobile Security
Continuity Services

Data C
D Center S
Security
i Network S
N k Security
i Application Security
A li i S i A t E d i tS it
Asset, Endpoint Security


Key takeaways

• Security and risk management alignment
• Security and IT operations integration
• Situational awareness / rapid response
• Actively and continuously monitor and evolve


03 Big Data management


Definition
Social networking
Uploading video In Germany Researching in
in the US China
Of the 6.9 billion people in the world,
Chatting in India
only 2.3 billion are online.
Blogging in Brazil

2020
25 million apps http://www.internetworldstats.com/stats.htm

4 billion people online
31 billion connected devices

Speed
450 billion online interactions, per day
1.3 trillion tags/sensors Complexity

50 t illi gigabytes of d t created
trillion i b t f data t d

Big Data valuable to financial services

“Big Data: The next frontier for innovation, competition, and Productivity, McKinsey Global
Institute, Presented at SIBOS, September 20, 2011

What are banks doing?

•Track behaviour
"Our top business
•Adjust risk exposure
Adjust challenges are optimizing
•Correlate with transaction customer relationships,
optimizing financial functions,
•Understand
Reducing business risk and
•Predict and influence
P di t d i fl ensuring regulatory compliance.
Our prioritization is around our
customer and then
revenue / profits "
profits.
– C Level Executive


Benefits for banks

•Customer behaviour
•Multichannel Customer Interaction
Multichannel
•Product Innovation
•Risk management and compliance
•Strategy and brand marketing
St t db d k ti
•Archiving & eDiscovery
•Information management


HP’s view: Big Data – The new normal

Consumer generated
Listen
Unstructured Integrate all
valuable

Real time – created and assessed
Sources of Understand
customer data Create an integrated
g
– From “empower the knowledge worker” analytic framework to
to “mobilize the consumer” enable Analytics for the
Masses
– From “time to information” to “time
to activity”
activity Engage
Embed the analytical
– From “implicit understanding of consumer insights closer the point-
sentiment” to “explicit understanding” of-interaction with the
customer


Key takeaways

New architecture
Creates transparency
Enables experimentation and analysis
Value creation and business models
Law f big
L of bi numbersb
Data Policy


04 Social media


Social media

27

Social networks demographics
Population/Registered Users
1,600,000,000

1,400,000,000
1 400 000 000

1,200,000,000

1,000,000,000

800,000,000

600,000,000

400,000,000

200,000,000

0

28

Corporates embracing social media

29 © Copyright 2012 Hewlett-Packard Development Company, L.P.
The information contained herein is subject to change without notice. Source: “How social technologies are extending the organization”, McKinsey Quarterly, November, 2011,
http://www.mckinseyquarterly.com/High_Tech/Strategy_Analysis/How_social_technologies_are_extending_the_organiz
ation_2888

Examples in Financial Services

30 © Copyright 2012 Hewlett-Packard Development Company, L.P.

Virtual currencies & loyalty programs

Frequent Flyer
Programs

31

Key takeaways
• Reach customers
• Manage brand
• Drive campaigns
• Learn from customers
• Govern usage appropriately

32

05 Mobility


Mobility becomes part of life for everyone
... A d th scale i enormous
And the l is
•Instant connections, communication & collaboration is changing people’s behavior

•Access to on line services is part of daily activity – Mobility First is quickly becoming the
business top priority


Online and mobile banking transactions continue to
increase rapidly
US Self-Service Banking Transactions by Channel (In Billions)

100 ATM
(CAGR = 0.8%)
80 Online
(CAGR = 20.1%)
20 1%)
60 Mobile 14.0
3.0 9.4
(CAGR = 84.8%) 1.2 5.6
40
35.0
23.3 26.8 30.0 33.3
20 5.6 7.3 9.1 11.8 15.3 18.6
14.0 14.2 14.3 14.4 14.5 14.6 14.6 14.7 14.8 15.0 15.1
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: TowerGroup

35

US branch transactions are declining (2010–14P)

Transactions (in billions)
15 14.70
14 70

14.11
14 13.69
13 69
13.28
13 12.88

12
2010 2011 2012 2013 2014
Source: TowerGroup

Mobile Payments Landscape
Physical Location / POS Online Mobile

P2P Transfers
(Domestic and
International)

Payments to
Merchants

37 © Copyright 2012 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. * Updated version of table from Edgar, Dunn & Company

Slide

Example Mobile Applications


38

Hp Enterprise Mobility Services framework
Mobility Apps Platform Unified Communication
• App Virtualization • Voice Transformation
• Desktop Virtualization • Virtual Workplace
• Mobile Apps – Native, Web • Unified Messaging

Mobility Device Management Mobility Protection
• Network Protection
• Infrastructure Mgt • Cloud Protection
• Mobile Device Mgmt • Mobile Data Protection
PROSUMER
• Mobile Access Protection

Mobile Data Mobile Applications
• Performance Engineering
• Storage Consulting
• App Transformation
• Mobile Data Trans.
• Mobile App Management
• Enterprise Data Sharing
• Windows 7/8 Migration
• Analytics/BI

GRC - MoC Enterprise Connectivity
• Network Transformation
• Education Services (UC) • Voice over Wi-Fi
• Education Services (Mobility) • Fixed M bil C
Fi d Mobile Convergence
• Mobility Policies (BYOD) Collaboration • Cloud Services Integration

•Search/ Information
•Document Management
• Social Collaboration
© Copyright 2012 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice.
39
• Mobile Process Enablement

Key takeaways
• Handling confidential information on the remote device if lost or stolen.
–Remove wipe
–Encryption
yp
• When an employee leaves company
–Remove Wipe
–Document tracking
g
• Document leaking into wrong hands
• Anti-virus/anti-malware software
• Limiting access to corporate network
• Policy and Governance
– Clouds

40

06 BYOD


Bring Your Own Device
Balancing choice while protecting corporate assets

Benefits
• Employees and customers use their •Shift cost to users
own device •Increasing employee satisfaction
•Accelerate technology adoption
• How to:
Concerns
• Embrace •Acceptable Use Policy
Acceptable
• Minimum security policy
• Govern usage
• Company mandated security tools
• Protect assets and data •Compliance and data ownership
•Retrieving company data on separation
• Path towards pervasive computing Risks
i k
•Unencrypted information
•Consumer Applications
•Weak passwords and security


Key problems for IT
Management of different platforms
2007 2010 2013
• From a single client OS to multiple OS
• Different devices, different form
factors, different update and life
cycles
?
• How to manage migration of existing
platforms
• Wh t about current desktop /Laptop
What b t t d kt /L t
strategy
Own vs BYOD


Key issues for IT
Security and risk management – Is it safe?

Device Overload
 Ever-Changing Types,
OSs and Security App Threats
h
Features  Insecure Access to
Corporate Apps Network Threats
 Usage of Many Secure Data Threats
 Lack of Reliability
k f l bl and Unsecure Networks  Sensitive Data Leakage
 Lack of Mobile Network  Device Lost or Employee
Visibility Leaves
User Th t
U Threats  Corporate Network
 Acting in Non- Vulnerability to Mobile
Compliant / Threats
Wrongful Ways


BYOD considerations
• Trust Model
• Remediation options
• Tiered policy
• User experience vs. security exposure tradeoff
• Corporate data protection (in transit, on device)
• Device control
• Acceptable use policy (cloud services)
• Liability assessment
b l ty ssess e t
• Education

45

Summary


Key takeaways for financial institutions
• Enterprise and customers always online
• Everything digital
• Service based economy
Service-based
• Data in motion architectures
• Marketplace growth
• Agility & Speed to Market
• GRC: Governance, Risk, and Compliance

47

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