National Discount Broker Site Compromised “National Discount Brokers’ site, which has 200,000 customers, was down for more than an hour Thursday as company engineers tried to fend off what appeared to be an attack” “The FBI is still investigating the other attacks, which took down Yahoo!, eBay and E*TRADE, among others.”

Ikea’s Contact DB Compromised From: "IKEA" To: D ear Lisa, As promised, we want to provide you with an update on our rigorous site security investigation. We worked with an expert third party Internet security firm to ensure that our system supports the most advanced Internet security protection that is essential in keeping up with today's ever-changing Internet climate. We are happy to announce that IKEA's online catalog requestor and Space Magazine requestor are back up on our web site. Online visitors to the catalog request areas should feel confident that their information is protected. Rest assured that no credit card or financial information was ever at risk. Additionally, access to your account was not at risk. You will still receive the IKEA catalog as you requested. Sincerely, IKEA Customer Service

How Security Empowered eSchwab to Become the #1 Internet Broker Ginni Chadha and Lisa Laguna MIS 597C November 27, 2000

Charles Schwab Services Retail brokerage Mutual funds Support services for independent investment managers Equity securities market making Research services Professional advising services

Traditional Trade Process Customer wants to make a trade. Customer walks into or calls Schwab Trade transacted. But what if it’s 3am???

e-Transformed Trade Process Customer wants to make a trade. Customer walks into or calls Schwab Trade transacted. No Problem!!!

e-Transformed Trade Process Customer wants to make a trade. Customer walks into or calls Schwab Trade transacted. But what if you’re in the middle of nowhere???

m-Transformed Trade Process Customer wants to make a trade. Customer walks into or calls Schwab Trade transacted. Voila!!!

Trading Anywhere

Trading Anytime

Obvious Benefit to Consumer, but What is Value Added for Schwab? Increased customer base Customer relationship development Knowledge acquisition Increased profits Cross selling/increased service offerings Increased brand awareness

MarketPlace Value Chain

MarketSpace Value Chain

Industry Sources Say… #1 Internet Broker, #1 Serious Investor, #1 In Ease of Use, #1 in Relationship Services, Fall 2000, Gomez. #1 Full Service Broker and #1 Discount and Online Broker, Sep 2000, Worth Magazine #1 in Investment Research, #1 in Portfolio Tracking, #1 in Banking Services, March 2000, TheStreet.com.

SWOT Analysis of eSchwab Strengths First to e-market Multi-channel strategy Large alliance network Strong security initiatives Strong brand One-stop shopping Weakness Weak international presence (esp. in wireless) Opportunities Knowledge value creation Global expansion Wireless market has great potential Threats Competitors catching up netGen may prefer cheaper trades Evolving security threats

Internet Security Model incorporates SSL Browser requests secure conversation w/ server Server provides certificate Browser authenticates Browser uses public key to encrypt shared secret key Browser sends encrypted share secret key to server Shared secret key encrypts rest of conversation

WAP Security Model incorporates WTLS Wireless Device Wireless Network WAP Gateway Internet Network Content Server WTLS enables super secure transactions without requiring the power-and memory-hungry security solutions used on the Web.

Evolving Security Issues Viruses Hackers…ask Bill Gates Continued investment in IT

Developing Security Technologies Digital signatures epad chip2chip Smart cards Biometrics

Summary Schwab’s evolving business model How the e-business is dependent upon state-of- the-art security measures Future issues and evolving security technologies

2000 Statistics Schwab 39% revenue growth from % profit growth from 98-99!!! 4.1 m online accounts 81% trades online (compared w/ 36% in 97) 80% transaction cost savings per trade 21% online market share (down from 50% in 97)