1. © CELENT Thinking The Unthinkable: Banks Relinquishing Control Of Their Payments Infrastructure Celent Webinar 10 September 2013 Gareth Lodge, Senior Analyst A recording of today's webinar and copy of the presentation will be available to Celent clients on our website at http://reports.celent.com/login.asphttp://reports.celent.com/login.asp

2. 1 © 2013 CELENT, A DIVISION OF OLIVER WYMAN Before we start… This webinar is based on a report published recently by Celent: “ Thinking The Unthinkable: Banks Relinquishing Control Of Their Payments Infrastructure”, May 2013 A recording of today's webinar and copy of the presentation will be available to Celent clients on our website after the event at http://reports.celent.com/login.asphttp://reports.celent.com/login.asp If you have any follow-up questions about the presentation, please contact Ken Kilduff at kkilduff@celent.com kkilduff@celent.com

3. 2 © 2013 CELENT, A DIVISION OF OLIVER WYMAN Agenda Where We Are Today Thinking Differently The Path Forward

4. 3 © 2013 CELENT, A DIVISION OF OLIVER WYMAN Competitive Differentiators For Transaction Banks

5. 4 © 2013 CELENT, A DIVISION OF OLIVER WYMAN Budgets for New Investments Remain Constrained

6. 5 © 2013 CELENT, A DIVISION OF OLIVER WYMAN Payment Systems Usually Look Like This

7. 6 © 2013 CELENT, A DIVISION OF OLIVER WYMAN Payment Services Hub – A Vision For Payments Architecture Credit transfers Direct debit Credit card Debit card … SWIFT ISO 20022 Domestic RTGS Domestic ACH SEPA Direct Credit SEPA Direct Debit … Branch instructions Online Mobile ATM … Corporate Retail Other FIs Bank internal departments … Outgoing payments Incoming payments Batch Single real-time Refund Rejection … XXXX Instrument typeStandard/ scheme Channel CustomerTransaction types Customer notification and reconciliation Execution Authorisation Clearing preparation (CSM selection) Validation, compliance, repairs and storing Instruction receipt, payment object creation and prioritisation 1234 56 1 2 3 Delivered as services, drawn from and available to either within the PSH or other areas in the bank (SOA)… … with ability to customise workflow by any dimension of A or payment characteristics (BPM) … and with sophisticated monitoring and alerting capabilities (BAM) 4 … reliably at large volumes and throughput 5 … with appropriate security, access control and audit trails A B C Ability to manage, on a single platform, any… … and deliver core payment functionality … under key conditions

8. 7 © 2013 CELENT, A DIVISION OF OLIVER WYMAN Your Spaghetti Will Now Magically Look Like This!

9. 8 © 2013 CELENT, A DIVISION OF OLIVER WYMAN Thinking differently

10. 9 © 2013 CELENT, A DIVISION OF OLIVER WYMAN Radical Change For The Better All conform to ISO standards Quiet revolution started in 1956 Has driven price down from $5.86 to $0.16 Industry worth $6.5 trillion

11. 10 © 2013 CELENT, A DIVISION OF OLIVER WYMAN Value Drivers Of Success Operational efficiency –Doing a sufficiently good-quality job (not necessarily high quality) at the lowest possible cost, with companies competing solely on headline price. Product innovation. –Innovation is often thought to be sexy new gadgets or processes, such as mobile payments. However, it could be as simple as packaging or designing products differently from the way others on the market do. Perhaps one of the greatest product innovations was the Gold card in the cards market. Indeed, a sign of success is that other companies copy an idea. Innovation therefore has to be continuous. Customer intimacy. –This discipline requires putting the customer at the center of everything the organization does. It could include delivering world-class customer service or simply developing products that allow customers to build their own products, segmenting to the power of one.

12. 11 © 2013 CELENT, A DIVISION OF OLIVER WYMAN A model for success?

13. 12 © 2013 CELENT, A DIVISION OF OLIVER WYMAN Payment services hub – a vision for payments architecture Credit transfers Direct debit Credit card Debit card … SWIFT ISO 20022 Domestic RTGS Domestic ACH SEPA Direct Credit SEPA Direct Debit … Branch instructions Online Mobile ATM … Corporate Retail Other FIs Bank internal departments … Outgoing payments Incoming payments Batch Single real-time Refund Rejection … XXXX Instrument typeStandard/ scheme Channel CustomerTransaction types Customer notification and reconciliation Execution Authorisation Clearing preparation (CSM selection) Validation, compliance, repairs and storing Instruction receipt, payment object creation and prioritisation 1234 56 1 2 3 Delivered as services, drawn from and available to either within the PSH or other areas in the bank (SOA)… … with ability to customise workflow by any dimension of A or payment characteristics (BPM) … and with sophisticated monitoring and alerting capabilities (BAM) 4 … reliably at large volumes and throughput 5 … with appropriate security, access control and audit trails A B C Ability to manage, on a single platform, any… … and deliver core payment functionality … under key conditions

14. 13 © 2013 CELENT, A DIVISION OF OLIVER WYMAN Where Do You Draw the Line? Online (retail) Online (corporate) Host-to- host ATM Treasury (bank) … Channel integration CSM integration RTGSACHSWIFT Card networks STEP2… High-care engineLow-care engineCore bankingCards… Payment orchestration layer Payment processing platforms 4 4. Vertical payment services hub

15. 14 © 2013 CELENT, A DIVISION OF OLIVER WYMAN The Path Forward

16. 15 © 2013 CELENT, A DIVISION OF OLIVER WYMAN Controlling The Cloud is No Longer Seen As An Issue APPROACH2010 SURVEY2012 SURVEYCHANGE Security110 Regulatory exposure220 Governance38-5 Skills43+1 Interoperability550 Cloud awareness660 Business case74+3 Changing business processes87+1 Source: McKinsey

17. 16 © 2013 CELENT, A DIVISION OF OLIVER WYMAN My Exciting Bed Time Reading

18. 17 © 2013 CELENT, A DIVISION OF OLIVER WYMAN What Could Cloud Do For Your Business? Agility Commercializing payments Supplying peak capacity Variable pricing to control volume flow Insight and analytics

19. 18 © 2013 CELENT, A DIVISION OF OLIVER WYMAN 1 2 3 4 5 Choose a Strategic or a Tactical Response Build the Right Team Decide on the Form of Outsourcing Build the Business Case Choose The Partner Starting on the right foot

20. 19 © 2013 CELENT, A DIVISION OF OLIVER WYMAN Conclusion

21. 20 © 2013 CELENT, A DIVISION OF OLIVER WYMAN Thank you! This webinar is based on a report published recently by Celent: –“Thinking The Unthinkable: Banks Relinquishing Control Of Their Payments Infrastructure”, May 2013 A recording of today's webinar and copy of the presentation will be available to Celent clients on our website after the event at http://reports.celent.com/login.asphttp://reports.celent.com/login.asp If you have any follow-up questions about the presentation, please contact Ken Kilduff at kkilduff@celent.com kkilduff@celent.com