Lets Build a Smarter Planet : Dynamic Infrastructure for Financial Services

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

The world is smaller and flatter. 1 2009 IBM Corporation

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. 2 2009 IBM Corporation

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. 3 2009 IBM Corporation

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. 4 2009 IBM Corporation

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 2008 5 2009 IBM Corporation

Smart financial institutions are doing so by becoming instrumented, interconnected and intelligent. 6 2009 IBM Corporation

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. 7 2009 IBM Corporation

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 2010. 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. 8 2009 IBM Corporation

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. 9 2009 IBM Corporation

+ + = 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. 10 2009 IBM Corporation

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. 11 2009 IBM Corporation

It s time to start thinking differently about infrastructure. 12 2009 IBM Corporation

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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. 17 2009 IBM Corporation

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. 18 2009 IBM Corporation

+ + = 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. 19 2009 IBM Corporation

+ + = An opportunity for financial services to think and act in new ways. Develop new intelligence to drive customer-centricity while improving data quality. 20 2009 IBM Corporation

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. 21 2009 IBM Corporation

+ + = An opportunity for financial services to think and act in new ways. Simplify and streamline to become more agile while reducing backoffice costs. 22 2009 IBM Corporation

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. 23 2009 IBM Corporation

+ + = An opportunity for financial services to think and act in new ways. Achieve smarter integrated risk management optimizing financial and operational risk. 24 2009 IBM Corporation

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. 25 2009 IBM Corporation

A dynamic infrastructure is a journey these interrelated initiatives can provide the DNA needed to thrive in a smarter planet. 26 2009 IBM Corporation

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. 1997 Today CIOs 128 1 Host data centers 155 7 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. 27 2009 IBM Corporation

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. 29 2009 IBM Corporation

THANK YOU 30 2009 IBM Corporation

THANK YOU 31 2009 IBM Corporation