Internet Banking Key Issues Internet Banking Working Group May 14, 1998

2 Presentation plan  Key issues for European banks  International co-operation  Next steps

3 Key issues for European banks  From online banking to Internet banking  Cyberfinance and eurofinance  Standards  Infrastructure  Smart cards  Regulatory environment  Competition versus co-operation

4 On-line banking and Internet banking  Opportunities and threats  Online banking experience Limited competitive impact Distribution channel complementarity  Internet banking anticipation Major cost reduction Value chain upheaval  Internet a channel..or a placenta ?

5 On-line banking and Internet banking  How reliable are channel transaction costs data ?  Hidden Internet costs  Who will benefit from cost reduction ?  Existing players  Newcomers  Service pricing  What coverage?  What service offerings?  Bundle or unbundle?

6 Internet banking  Opportunities  New services Lifecycle asset management Transaction management Trust infrastructure management  Threats  Lack of competitive differentiation  Diminution of customer loyalty  Disintermediation …or value displacement

7 Internet and Euro  Coping with a large-scale system overhaul  What is the combined impact ?  On technology deployment New architecture  On marketing approach  On the market structure From national to transborder retail banking

8 Standards  Adopting US standards ?  OFX  Integrion  SET  Adapting US standards ?  How to organise input  The future of national standards  HBCI  Etebac

9 Internet banking standards EDIFACT, (SWIFT?) SSL SRT OFX OBI SET OTP Transaction Standards Content Confidentiality/ Integrity Authentification Free Choice Free Choice Free Choice: - PIN/TAN - Dig. Certif. - Smartcard SSL HBCI SSL Integrion Merged in the future SSL Source: Brokat

10 Standards  Which forum ?  The role of traditional standards bodies CEN very active in electronic commerce  The role of financial industry bodies ECBS  Which scope ?  Technical  Business  User interface

11 Infrastructure  What are the requirements ?  Geographical coverage  National or European  Basic architecture  Intranets or extranets ?  Integration or interconnection ?  Project development and ownership  Public, private or cooperative ? Who should be responsible for  Development?  Operations?  Conflict resolution ?

12 Smart card use  How critical ?  Optional  Integrated  What services ?  SET Enhancement  Generic security  Stored value  Which standards ?  How useful is EMV ?

13 Regulatory environment  Transborder regulation  Trust infrastructure oversight  Customer protection  Treatment of new players  Virtual banks  Technology providers and system integrators  New risks  Remote banking  System reliability

14 Competition and co-operation  New rules of the game Banks and other financial services suppliers Banks and technology providers Banks and their customers Co-opetition Competition Co-operation

15 International co-operation  Banking Information Technology Secretariat (BITS)  Part of The Bankers Roundtable 125 largest bank holding companies in the United States, represented by their senior executives  Created to ensure banking sector input into Standard setting New payment architecture design and implementation Public policy discussion of remote banking and related issues  Organisation High-level board Small secretariat Working group network

Security & Risk Assessment Steering Committee Security & Risk Assessment Steering Committee Board of Directors Catherine Allen CEO Catherine Allen CEO BITS Advisory Group BITS Advisory Group BITS Staff Research & Communic- ations Steering Committee Research & Communic- ations Steering Committee de novo Meta- Architecture Working Group de novo Meta- Architecture Working Group Industry Review Working Group Industry Review Working Group Standards Steering Committee Standards Steering Committee Legal and Public Policy Working Group Legal and Public Policy Working Group Privacy Working Group Privacy Working Group International co-operation  BITS Structure

International Co-operation  BITS: Selected Initiatives  Privacy  Security Certificate Authority Business Case Analysis Global Security Architecture White Paper  Meta Architecture  Standards OFX/Gold Process - Draft II Smart Card Standards White Paper  Legal and Public Policy Digital Signature Legislation White House Electronic Commerce Strategies

International Co-operation  BITS and FIWG  Several informal meetings  Mutual interest in co-operation  Priority areas SET  Smart card integration  Governance Trust infrastructure and Security Standards development  Next step High-level meeting late June/early July

19 Next steps  Common projects  Transborder projects  Common infrastructure  Standards

20 Next steps  Is there a need for an Internet banking forum ?  Bringing together Financial institutions and technology providers Traditional players and newcomers Public authorities and private sectors  Allowing a sharing of data and experiences  Developing consensus on critical issues