Lets Build a Smarter Planet : Dynamic Infrastructure for Financial Services

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1 Fernando Pedraza Vice President System & Technology Group Latin America Lets Build a Smarter Planet : Dynamic Infrastructure for Financial Services 2009 IBM Corporation

2 The world is smaller and flatter IBM Corporation

3 Globally, systems and infrastructure are reaching a breaking point. Explosion of data, transactions, and digitally-aware devices strains IT infrastructure and operations. Economic downturn and future uncertainty. Unprecedented dislocation across the global financial system. Overnight bank failures and widespread government intervention. Decades worth of financial industry consolidation in a matter of months. Sudden shift from growth to survival across the developed and developing world. A proliferation of new risks and threats (physical and virtual). Requirement to reduce cost and improve business innovation IBM Corporation

4 The need for progress is clear. 50% Percentage of customers who would give their bank only two chances to fail before considering a change in banks. 93% of the 285 million electronic attacks are focused on the finance sector, and well over half were detected by third parties 25 billion Global trading systems are under extreme stress, handling billions of market data messages each day IBM Corporation

5 The opportunity for progress is clear. 90% reduction in manual process Streamlined operations: Bank of New York Mellon The bank streamlined operations to achieve a 90% reduction in manual touch points in the check-clearing process cutting processing errors and required remediation. $1M in fraud eliminated each month Large US Retail Bank: Financial Crime On the second day of production, the new system prevented $500k in a single transaction, a additional $733k of activities in the first month and confirmed $1M on a monthly basis. 21x more messages Automated trading: TD Bank Financial Group IBM developed a first-of-a-kind system capable of consuming, analyzing and acting on realtime market data while maintaining sub-millisecond response times even under extreme data loads IBM Corporation

6 The way the world works is changing and financial services organizations must innovate their business models to keep up. 90% of executives interviewed believe the returns of the past are over. 85% believe profit pools will shift significantly. Note: 1 Question asked: What regulatory actions do you anticipate over the next five years, select top two (IBM / EIU survey); 2 Source: IBM / EIU Survey IBM Corporation

7 Smart financial institutions are doing so by becoming instrumented, interconnected and intelligent IBM Corporation

8 INSTRUMENTED We now have the ability to measure, sense and see the exact condition of everything. Today, there are 1 billion transistors for each person on the planet. By 2010, 30 billion RFID tags will be embedded into our world and across entire ecosystems. Approximately 89% of the U.S. money supply exists entirely in electronic form. A smarter financial system is instrumented, enabling businesses to measure and control data at the atomic level, allowing them to sense and respond quickly and precisely IBM Corporation

9 INTERCONNECTED People, systems and objects can communicate and interact with each other in entirely new ways. The Internet of people is 1 billion strong. Some 35% of online banking households will be using mobile banking by Increasing sophistication of mobile phones is bringing over 2 billion unbanked from the cash economy into the banking and microfinance ecosystem. The number of non-cash payments are estimated to exceed 110 billion by 2011, totaling more than $90 trillion. A smart financial institution's system is built on interconnected data that enables innovation, advances straight through processing and delivers a single source of the truth IBM Corporation

10 INTELLIGENT We can respond to changes quickly and accurately, and get better results by improving insights distilled from data in real time. Every day, 15 petabytes of new information are being generated. This is 8x more than the information in all U.S. libraries. Poor quality data will cost the banking industry $27 billion in operating costs. Banks mine 15 million transactions every day. A smart financial institution enables the rapid, intelligent analysis of a vast mix of structured and unstructured data to improve insight and enable informed judgment IBM Corporation

11 + + = An opportunity for financial services to think and act in new ways. Develop new intelligence to drive customer-centricity while improving data quality. Simplify and streamline to become more agile while reducing backoffice costs. Achieve smarter integrated risk management optimizing financial and operational risk IBM Corporation

12 We must move past today s challenges to seize tomorrow s opportunities. HOW CAN WE ADDRESS HIGHER SERVICE EXPECTATIONS Internet-savvy consumers and employees expect 24x7 access to quality services. WHILE ALSO LAYING A FOUNDATION FOR NEW INTELLIGENCE Eradicate information silos and create an enterprise view that supports new models for intelligent business decisions. Create a single customer view to drive advocacy and profitability. RISING COST PRESSURES Staggering levels of complexity and inefficiency drive up cost and stifle innovation. IMPROVED PROCESSES Radically simplify architectures to yield business agility while eliminating inefficiencies across the enterprise. Enable rapid assembly of services to drive innovation at every point in the value chain. NEW RISKS & THREATS The connected, collaborative world is also a more vulnerable world. INTEGRATED RISK MANAGEMENT Understand the dynamics of your financial exposure. Align it continuously with your business and prudential objectives. Mitigate operational risks and financial crime. Turn regulatory compliance into competitive excellence IBM Corporation

13 It s time to start thinking differently about infrastructure IBM Corporation

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18 In this smarter world, we need our infrastructure to propel us forward, not hold us back. Infrastructure that is instrumented, interconnected and intelligent. Infrastructure that brings together business and IT to create new possibilities. Data Center Infrastructure Trading Infrastructure Communications Infrastructure Branch Infrastructure We need a dynamic infrastructure IBM Corporation

19 Building a dynamic infrastructure. Service Management Provide visibility, control and automation across all the business and IT assets to deliver higher value services. Asset Management Maximize the value of critical business and IT assets over their lifecycle with industry tailored asset management solutions. Virtualization Reduce cost, improve asset utilization, and speed provisioning of new services with leadership virtualization and consolidation solutions. Energy Efficiency Address energy, environment, and sustainability challenges and opportunities across your business and IT infrastructure. Business Resiliency Maintain continuous business and IT operations while rapidly adapting and responding to risks and opportunities. Security Ensure governance, risk management and compliance with end to end industry customized solutions. Information Infrastructure Help businesses achieve information compliance, availability, retention, and security objectives IBM Corporation

20 + + = An opportunity for financial services to think and act in new ways. Develop new intelligence to drive customer-centricity while improving data quality. Simplify and streamline to become more agile while reducing backoffice costs. Achieve smarter integrated risk management optimizing financial and operational risk IBM Corporation

21 + + = An opportunity for financial services to think and act in new ways. Develop new intelligence to drive customer-centricity while improving data quality IBM Corporation

22 Smart financial services: Develop new intelligence. SMART IS Achieving growth and deeper penetration of new markets through seamless self-service experience. First National Bank of Omaha: Implemented a first-of-a-kind self-service solution that achieved customer growth at 30% over target and a deeper penetration among younger, technologically savvy banking customers. SMART IS Accessing integrated data in realtime for faster client insights and increased customer satisfaction. Rabobank International: Integrated its financial data sources into a customizable, real-time Web portal, enabling staff and customers to gain the insight they need 35% more quickly IBM Corporation

23 + + = An opportunity for financial services to think and act in new ways. Simplify and streamline to become more agile while reducing backoffice costs IBM Corporation

24 Smart financial services: Simplify and streamline. SMART IS Consolidating and virtualizing computing resources to dramatically lower operation costs. Bank of Russia: Consolidated server and data center infrastructure to reduce technical staff workload by 85% and payment processing costs by 95% for $400 million annual savings. SMART IS Providing a source of new payments services while creating faster processing speed and reduced errors. Bank of New York Mellon: Streamlined operations to achieve a 90% reduction in manual touch points in the check clearing process cutting processing errors and required remediation IBM Corporation

25 + + = An opportunity for financial services to think and act in new ways. Achieve smarter integrated risk management optimizing financial and operational risk IBM Corporation

26 Smart financial services: Achieve integrated risk management. SMART IS Using anonymized data and advanced mathematics to harness the shared experiences of financial institutions and improve risk quantification. The Operational Riskdata exchange Association: Uses anonymized data to help improve statistical modeling, more accurately quantify risk exposure and address regulatory compliance needs. SMART IS Having the right mix of pattern detection and preventive measures to proactively deal with financial crimes and fraud. Large US Retail Bank: interrupts financial crime by automating business rules for account opening. The system prevented a $500k fraud transaction and $733K of additional fraudulent activities the first month IBM Corporation

27 A dynamic infrastructure is a journey these interrelated initiatives can provide the DNA needed to thrive in a smarter planet IBM Corporation

28 IBM s own smart transformation has delivered results. IBM IT Transformation From 2002 through 2007, IBM's own IT investments delivered a cumulative benefit yield of approximately $4 billion. For every dollar invested, we saw a $4 cumulative benefit Today CIOs Host data centers Web hosting centers 80 5 Network 31 1 Applications 15,000 4,700 Data Center Efficiencies Achieved Project Big Green Consolidation and virtualization - thousands of servers onto approximately 30 IBM System z mainframes. Additional virtualization leveraging System p, System x and storage across enterprise. Substantial savings being achieved in multiple dimensions: energy, software and system management and support costs. The virtualized environment will use 80% less energy and 85% less floor space. Cloud-enabled on demand IT delivery solution Self-service for 3,000 IBM researchers across 8 countries. Real time integration of information and business services IBM Corporation

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30 We ve only just begun to uncover what is possible on a smarter planet. The world will continue to become smaller, flatter and smarter. We are moving into the age of the globally integrated and intelligent economy, society and planet. There s no better time to start building a smarter financial system focused on restoring public and governmental trust and breathing new life into a faltering global economy. Let s work together to drive real progress in our world IBM Corporation

31 THANK YOU IBM Corporation

32 THANK YOU IBM Corporation