Banking Security in a Digital Age

1. Banking Security in a Digital Age Trevor LaFleche, IDC Financial Insights

2. Partneri Medijski pokrovitelji

3. Sadržaj predavanja • Current state of affairs • Downturn increases incentives • Retail Banking • Expectations v. Human behaviour • Corporate Banking • Increasingly complicated • Internal Security! • Keeping it Simple • Don’t let security take over

4. Banking Security in a Digital Age • The number of security attacks against the financial services industry continues to rise as the economic downturn takes hold of the European Economic Area. While institutions struggle to deal with internal and external fraudulent activities, they also need to respond to increasing demands from customers for data transparency. • How will banks tackle security in an increasingly open world?

5. The Downturn Croatia GDP will shink by -3.7% In 2009. This represents the largest contraction in GDP. Forecasts for 2010 are not very optimistic 5

6. Forecasting in difficult times… Probability of downside risk much higher than of upside Clearly most banks told to reduce IT budgets in 2009: Services contracts and software upgrades renegotiated Support teams cut Non-strategic initiatives scrapped Results in the first contraction in IT spend – much worse than 2002 downturn However not all doom and gloom – fewer projects but with more strategic imperative Banks need to define profit making businesses in tight margins Negative IT growth for 2009, positive 2010

7. Number of banks in Croatia

8. Fraud .07% As much as Of all spending on credit and debit cards worldwide is fraudulent! As the downturn grows so will fraud. 8

9. Initial responses to credit crisis/ recession Increasing efficiency is still the key

10. A typical bank’s agenda • Efficient & Cost Effective • Need to be efficient – new business models/re-think core • Customer-centric • People and companies have expectations (created & driven by the internet), but customer experience only as strong as your bank’s commitment to understand their needs • Operational & Other Risks • Enterprise & IT risk controls are only as strong as your people, need increased visibility, transparency & responsibility • Agility & Flexibility • Are your systems and processes ready for new opportunities – can you change course in these fast-moving times? • Your strategy is only as strong as you ability to deliver and the speed of your response

11. So what are the new realities in post-crisis banking?

12. Customisation is king

13. Customization… but not as we know it Customers are no longer satisfied with basic transaction services but are looking for a services that help their lifestyle Recognizing that there will be distinct segments of future consumers rather than one monolithic group called "the future consumer“ will be a key challenge (These distinct segments will demand various types of interactions based on their preferences instead of one common set of interaction needs.) Building the road map will first require an assessment of the current customer experience and a vision as to where the FI wishes to be One of the dangers will be in underestimating the challenge and complexity of building and executing a successful customer experience strategy that meets the needs of future consumers It is all about MICRO-SEGMENTATION 13

14. Evolution of Banking Banking is moving into Lifestyle enhancements, however, Business cases have Overestimated profitability of the segment and Underestimated The effort to do it right

15. Banks lose control of data

16. Access to cash essential for corporate treasurers: Banks that can improve the FX reporting tools they offer to their clients have an opportunity to increase customer satisfaction and market share. Banks that can quickly innovate and provide clients with new services to mitigate risk, increase cash visibility, and improve efficiency will gain market share. Transparency even more critical

17. Matching investment priorities Clear emphasis on building better front end Moving from information access to product fulfilment, file and document processing and exchange Focus on mass market adoption and cost efficiencies Source: Financial Insights Survey 2009 17

18. What should banks do? 4 A focus on key areas can help banks manage 18

19. Don’t forget the customer 95% Up to of customers think banks think too much about security and no enough about making their life easier 19

20. Find the real danger 15 In 2009, the worst global losses of data were either due to lack processes or human error 20

21. Admit it is very complex The average bank has 17 Interconnected systems to deliver even the most basic retail services 21

22. Four key things • Understand the customer • Retail and Corporate • Security Policy • Sexy IT stuff and the basics • Monitor the real risk • Internal and External • Trust but Verify 22

23. Hvala.