SBC Vertical Markets Retail Banking Overview

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SBC Vertical MarketsRetail Banking Overview

• 2005 Update

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Banking Industry Session Outline

• Section 1 The Banking Vertical
• Section 2 Defining the Banking Opportunity
• Section 3 Positioning with the Banking Customer
• Section 4 Success Stories
• Appendix Additional Resources

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The Banking Vertical
4
Financial Markets

Financial Services Vertical
Cap Markets
Banking
Other
Stock trading Options and commodities Investment
banking
Traditional Banks Savings Institutions Credit
Unions Credit Cards
Funds/trusts Central bank/currency
Insurance
Real Estate
Commercial and retail bankinglargest opportunity
for non-insurance financial services about 55
of vertical revenue.
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Overall Market Size Financial Services
Expected CAGR (2003 2010) 2.17
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IT Spending World-wide Upside
Source Worldwide IT Spending 20042008 Update by
Vertical Markets, IDC 32668
Largest Spend Average Growth Significant
Opportunity
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Overall Financial Market - Projected IT and
Telecom Spending
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Defining the Opportunity
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Telecom Expenditures Banks
Expected CAGR (2003 2010) 3.58
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Telecom Services Breakout Banks
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Opportunity Segmentation
gt 70 in Region
Total SBC Share of Segment 720 Million
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Top 10 Banks in Vertical IT and Telecom Spend
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Section 3Positioning the Customer
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Challenges Drivers
Challenges
Drivers
Business Continuity, Compliance Risk Management

• Sarbanes-Oxley Act (SOX)
• Check-21
• Gramm Leach Bliley Act (GLBA)
• The Patriot Act
• Basel II
• Increasing and Changing Regulations

Transforming the Branch and Enabling the Front
Office Improved Service, New Revenue

• Increased competition
• Expanded portfolio
• Most expensive channel
• Need for incremental revenue
• Front-line execution of relationship-based
  strategies

• Integration of delivery channels
• Demand for Consistent customer experience
• Differentiation through customer service
• Relationship-based strategies

Enhance the Customer Experience

• Continuity of Government and Disaster Recovery

• Multiple networks, duplicate resources and
  complexity resulting from MA activity
• Site to site collaboration
• Customer demand for varied points of access
• Resource shifting to meet changing customer needs

Cost Control Operational Efficiency

• Continuity of Government and Disaster Recovery

Source Nortel
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Regulatory IssuesImpacting Banks
Requires financial services companies to improve
capabilities to identify customers flag
suspicious transactions (anti-money-laundering
and anti-terrorism programs now required)
Requires integrating back end systems
upgrading storage and hardware infrastructure
Sarbanes Oxley Actpublic company disclosure on
effectiveness of internal controls on financial
reporting Requires a framework for internal
control, rules, processes audit trail
The SOX Act
The law facilitates check truncation by advancing
the use of a new negotiable instrument referred
to as a substitute check. The law enables wide
spread creation and use of substitute as a
routine practice, not simply for damage or
destroyed checks.
Check 21
The Gramm Leach Bliley Actrequires that
financial institutions protect consumers
personal information. Requires distribution of
privacy notices Requires networking apps that
enable a consolidated view of customers across
multiple divisions. Increases competition by
broadening allowable offerings.
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The Role of the Branch has Evolved
Critical Success Factors
Branch Strategies
Characteristics

• Customer empowerment
• Virtual agency
• Specific value propositions

Advisory Skills, Excellence in Customer Experience
Branch as Wealth Center
Sales Skills, Incentives, Product Knowledge

• Best of breed manufacturer of products,
  services
• Advantage based on scale,process excellence

Branch as Sales Office
Scale, Flexibility, Efficiency

• Physical and virtual fulfillment
• Supply chain management
• Infrastructure management

Branch as Service Center
Alliance Skills, Open Strategy, Control Points,
Destination

• Price discovery
• Intermediation
• Risk management

Branch as Marketplace
Source IBM
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Bank Branches are Looking to

• Provide new customer productivity tools on every
  branch phone
• Simplify management of moves, adds, and changes
• Manage all centralized customer calls and give
  every employee in each branch a complete view of
  every customers account
• Ensure that the most appropriate sales or service
  employee answers calls from the most appropriate
  customer
• Enhance corporate communications by allowing
  employees to receive company information in a
  timely manner
• Give senior executives more visibility by
  allowing them to talk to all branch employees
  live, every day in a TV format
• Have real-time branch surveillance for
  productivity management and law enforcement
  support in hold-up situations
• Distribute media for advertising, training or
  cross-selling promotions to all branches without
  increasing bandwidth charges
• Push real-time information to tellers and agents,
  keeping them abreast of current information, via
  XML applications.

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Customer Experience The Things Network Allows
You to Do
Network Security integrated with Regulatory
Compliance
Centrally managed Locally delivered
E-Learning Digital Marketing Corp. Comm.
Centrally Managed Video Surveillance
HVAC Security
ATMs Kiosks
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Cost Control Solving Problems w/ Technology
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Telecom Trends Address Financial Critical
Success Factors
Benefits
Business Continuity Robust networking Redundant
networking w/ backup datacenters Complete
security practices with Implemented solutions

• Robust networking
• Reliability
• Uptime of networks is increased due to
  consistent
• best practice architectural approach to network
  design.
• Interoperability
• Multiple solutions work together based on one
  common architectural approach
• Security Managed Solutions provides
• 24x7x365 security response ability
• router, firewall, anti-virus, and IDS rule
  setup documentation
• Anti-virus auditing report
• Network security monitoring raw data logs
• Security threat monitoring log
• Redundant networking with backup datacenters
• Availability of mission critical applications
  customer info

Customer Experience and Service IP Telephony Web
and voice based conferencing services VPNs for
Branch and WAN connectivity Extensive web based
services
Cost Control Operational Efficiency Converged
single network State of art wireless
solutions full branch connectivity and
flexibility Image, storage and hosting
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How Much Does an Outage Cost?
Applications Downtime (/minute)
ERP (order entry) 13,000
Supply chain mgmt. 11,000
E-commerce 10,000
Internet Banking 7,000
Customer Service center 3,700
Electronic funds transfer 3,500
Messaging 1,000
Survey by Standish Tower Group
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Telecom Trends Address Financial Critical
Success Factors
Benefits

• IP Telephony
• Centralize and integrate contact center
  applications
• Leverage agent resources over multiple sites
• CTIallowing agents to see whos calling before
  picking up call
• Merge voice over with e-commerce websites
• Transfer calls between branches and virtual
  contact centers
• Conference calling services for employees and
  customers
• Mobility
• Intelligent call routingallowing access to voice
  data via phone, laptop, PDA or any device
  anywhere
• Wireless LAN phones connect to wireless access
  points throughout branch
• VPN
• Connectivity between branches
• elearning
• Broadcast messages of products promotions
• Leverage all resources of the branches to give
  smaller stores the same look and feel of larger
  stores
• IP enabled ATM and Kiosk provide information on
  product and services, i.e. loan approval
• Expand web based banking services

Business Continuity Robust networking Redundant
networking w/ backup datacenters Complete
security practices with Implemented solutions
Customer Experience and Service IP
Telephony Mobility VPNs for Branch and WAN
connectivity and extensive web based services
Cost Control Operational Efficiency Converged
single network State of Art Wireless
solutions Full branch connectivity and
flexibility Image, storage, and hosting
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Telecom Trends Address Financial Critical
Success Factors
Benefits

Business Continuity Robust networking Redundant
networking w/ backup datacenters Complete
security practices w/ Implemented solutions
Converged single networkEfficient More
efficient than running two separate networks
Merged voice data Use one network to
satisfy multiple compliance issues Reduces
maintenance costs by standardizing
infrastructure Route calls to contact centers
during peak hours State of Art Wireless
Solutions Productivity gains with mobile
wireless solutions Wireless concierge Hotspots
Full branch connectivity and flexibilitySpeed
Allows rapid deployment of new applications
Enabling change without re-engineering the
network
Customer Experience and Service IP Telephony Web
and voice based conferencing services VPNs for
Branch and WAN connectivity Extensive web based
services
Cost Control Operational Efficiency Converged
single network State of Art Wireless
solutions Full branch connectivity and
flexibility Image, storage and hosting

• The Sage study found that while cost savings was
  cited as an IPT deployment driver by 75 of those
  surveyed,
• Productivity savings was cited by more than 60.
• The productivity benefits were felt by both IT
  non-IT workers.
• 66 of the respondents said they perceive IPT
  deployment gave them a competitive advantage.

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Key Trends Summary

• MA activity continues to drive consolidation and
  competition, leading to a more global market, and
  the development of multi-service financial
  superstores
• Online services are changing the marketplace
• Customer service and customization are important
  competitive factors
• Focus on security and information privacy has
  sharpened as awareness of identity theft grows
• Automation, self-service, and other IT-based
  services are being used to off-set staff
  reductions

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General Growth Opportunities

• Customer service and differentiation are driving
  growth in call center services, managed services,
  and routing services
• Internet banking is driving bandwidth, security
  and content services
• Online processes are driving opportunities in
  image, storage, and hosting services
• Regulatory and security needs are driving
  security services, redundant networks and
  business continuity services.

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Starting Questions

• Do your customers have anytime access to account
  information and services? Do you offer electronic
  statements and electronic bill presentment and
  payment (EBPP)?
• Are you losing customers to competitors who offer
  enhanced services over the phone and Web?
• Can your existing systems and network support
  your current product go-to-market needs?
• Can your customers access their information
  through multiple channels of communications, i.e.
  phone, Web, at the branch?
• How effectively are you using the customer data
  being collected online, on the phone and at the
  branch? How are you doing as compared to your
  competitors?

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Starting Questions (cont.)

• Do you know who your most profitable customers
  are?
• Are you effectively cross-selling products to
  those customers who are most likely to buy them?
• Do your employees have to access multiple legacy
  systems to process account transactions?
• Do your data systems provide a comprehensive view
  of your customers on a single screen?
• Does your staff have the tools they need to stay
  up to date on new products?
• Are you facing rising costs for site-to-site
  communications, sales force management, and
  training functions?
• Are you facing increasing competition due to
  mergers and acquisition?

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AppendixAdditional Resources
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Basic Needs and Opportunities Telecom Services
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Basic Needs and Opportunities Consulting
Services
Frost and Sullivan March 2004
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Basic Needs and Opportunity Software
SBC Solutions are lead Callisma or System
Integration Partners
Frost and Sullivan March 2004
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Basic Needs and Opportunity - Hardware
Frost and Sullivan March 2004
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Key Challenges

• Sarbanes-Oxley legislation and need for business
  transparency forces financial services firms to
  be as open as possible with their records,
  transactions, and business dealings
• Graham-Leach-Bliley (GLB) legislation continues
  to push financial services firms to become
  financial superstores, encouraging significant
  cross-segment expansion
• Business continuity/disaster recovery needs have
  taken on increased importance for financial
  service market follilng 9/11 attacks, forcing
  financial services firms to ensure that data is
  as accessible as possible at all times
• Mutual funds scandals regarding market-timing
  transactions are leading to new regulations and
  promoting greater integrity of financial services
  practices.
• Likelihood of increased merger acquisition
  activity to achieve greater scale affects
  potential buying patterns for IT/telecom services
• Online banking opportunities that enhance
  customer experience continue to be refined and
  improved, requiring investment in time and money
  from financial services companies
• Check 21 legislation forces financial services
  institutions to explore check electronification
  requirements

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Securities Exchange Commission (SEC)

• Electronic message storage
• Commission Guidance to Broker-Dealers on the Use
  of Electronic Storage Media under the Electronic
  Signatures in Global and National Commerce Act of
  2000 with Respect to Rule 17a-4(f)http//www.sec.
  gov/rules/interp/34-44238.htm
• SEC Compliance and Storage Managementhttp//www.s
  torageadmin.com/Articles/Print.cfm?ArticleID26084
  
• SIA Objects to SEC Rule for E-Mail
  Storagehttp//www.securitiesindustry.com/midweek.
  cfm?article741
• CIO Mandate from SEC Regulators Save Your
  Electronic Documentshttp//www.cio.com/archive/03
  1503/tl_washington.html
• CIO SEC Rule Creates Opportunity for CIOs on
  Corporate Boardshttp//www.cio.com/archive/021503
  /tl_washington.html
• Securities Industry Instant Messaging Standards
  Keeping It Simplehttp//www.securitiesindustry.
  com/midweek.cfm?article764
• Banktech Do Not Delete! http//www.banktech.com/
  story/news/BNK20030214S0002
• New York Times New Demand Seen for Data
  Storagehttp//nytimes.com/2003/04/21/technology/2
  1NECO.html
• No E-Mail Relief in New Books-and-Records
  Ruleshttp//www.securitiesindustry.com/midweek.cf
  m?article794

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Securities Exchange Commission (SEC)

• Business continuity planning
• Interagency Paper on Sound Practices to
  Strengthen the Resilience of the U.S. Financial
  Systemhttp//www.sec.gov/news/studies/34-47638.ht
  m
• Comments on Proposed Rule Draft Interagency
  White Paper on Sound Practices to Strengthen the
  Resilience of the U. S. Financial
  Systemhttp//www.sec.gov/rules/concept/s73202.sht
  ml
• Feds Prep Disaster Recovery Regshttp//www.bytean
  dswitch.com/document.asp?doc_id22508printtrue
• Feds Set DR Regulationshttp//www.byteandswitch.c
  om/document.asp?doc_id31105printtrue
• Securities Industy Industry Still Worried About
  BCP Distance Regshttp//www.securitiesindustry.co
  m/midweek.cfm?article769
• Wall Street Technology Not Quite
  Righthttp//www.wallstreetandtech.com/story/inDep
  th/WST20021212S0006
• Wall Street Technology Is Regulation Right
  Around the Corner?http//www.wallstreetandtech.co
  m/story/mag/WST20011210S0014