PowerPoint Presentation

Quick personal intro and HK take-away1

Bankers are in a state of shockNot what they signed up forBuried in busy unable to cope with changeFuture is more frightening than the present2

The goal needs to be more than just great reports need great experiences.

Of our 10 Retail Banking Trends and Predictions, all are supported by data and analytics beyond what is used today.3

The consumer is in control. The ability to choose what, when, and how to transact. The mobile device makes location and context more important than ever. Banking no longer needs to be an independent activity, but can be integrated into everything we do in our daily lives. We begin our shopping for financial services online and want to continue to make our purchases without leaving the channel we started with. No longer defined by age, but by the way we want to interact and engage.

Digital is not a channel it is a lifestyle.4

These changes have brought about the fintech revolution, with firms that are bringing innovation and digital solutions to the entire value chain we have come to enjoy.

In fact, last year, there were 12,000 fintech firms created and funded with over $65 billion in VC investments. But the fintechs do not have a monopoly on technology or innovation in the marketplace. They do not have the customer bases or relationships that legacy banking organizations have. They do not have the knowledge of regulations or compliance or the massive capital underpinnings and trust of established banking organizations.

There is no reason why legacy financial organizations cant leverage the same data, technology and innovations in the marketplace. There is no reason why they cant build many of the same solutions or partner with these same fintechs for a better product line.

Our legacy systems, our legacy mindset and our legacy processes are our handicap. But we have value we can bring to the partnership.

We are entering a phase of coopetition.

Data, Like Oil, Is Pretty Useless In Its Raw State. Data is everywhere in a large organization, but it has to be stored and analyzed before it generates any value. (Tom Groendfelt)5

The singular goal of these fintech providers and the singular goal for any banking organization that wants to succeed in the digital age is to make banking simpler. Move it from being something that is done to something that is behind the scenes of everything we do.6

From 1965 till today and beyond, how we engage and communicate with technology is getting more integrated with who we are and the decisions we make. We have moved from rooms of electronics, to box on a desk to devices all around us making our daily lives better.

65, 78, 82, 84, 02, 06, 14, 14, 157

The Internet of Thingsa huge network of sensors and smart devices, combined with advanced analytics and cloud services to make sense of all the datapromises to augment and disrupt products and services across industries. Expectations grow more spectacular every day: Forecasters predict more than 20 billion Internet of Things devices within a few years. That's approximately 4 to 6 devices for every human being on the planet.

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The digital banking nirvana is not just about smart phones. It is about Terminals, Wearables, Beacons, NFC, HCE, BLE, Contactless

Finally we have a complex technological landscape which is changing every day For instance, Jawbone collaborated with Amex to create wearable technology which incorporates payments.

In this case, it is about realizing that in more and more situations, people prefer leaving their smartphones at home. And so the answer in this case is adding financial solutions to the technology which is relevant to the situation - in this case a ikeychain.9

While smart watches are often referred to as an IoT device, they are basically sub-optimal mobile devices. Nobody seems happy with the value received for the cost since solutions have not materialized yet. Similar to Google Glasses, this is an example of the hardware preceding the value potential.10

But, wearables are extending beyond the phone. Card networks and other stakeholders are now pushing boundaries and experimenting with the integration of payment platforms on other wearable and portable devices.

Smart jewelery manufacturer Ringly partnered with MasterCard to allow its customers to make payments with their MasterCard using a ring. The ring leverages NFC technology to transmit payment data to terminals, similarly to how smartwatches do. Although it's unclear how well the device will sell, it could offer additional convenience for shoppers it doesn't require shoppers to take out their phone or wallet, and it presents an alternative accessory to wearing a watch.

Visaintroducedan NFC-enabled wearable payments ring that it plans to prototype with Team Visa athletes at the Olympic games in Rio de Janeiro this summer. The ring, which includes a Gemalto micro-chip and NFC-enabled antenna, can be tapped at NFC-enabled terminals to make payments. The ring will be linked to a contactless prepaid Visa card that athletes will be able to reload via an online portal, Chris Dean, a senior director of innovation and strategic partnerships at Visa, told BI Intelligence.11

Physical buy buttons could help drive the payments-enabled device revolution.Last year,Amazon launched a one-click purchasing device for Amazon Prime members calledDash. The key fob-sized device is branded by select Amazon partners such as Tide, Gillette, and Huggies and it allows customers to re-order items with the push of a button. A number of other brands have since hopped onboard the program.

Taking Dash a step forward, Amazon launched the Dash Replenishment Service, which is integrated directly with products, enabling automated order refills through Amazon. With this service, the consumer doesn't have to remember to shop for these items at all. For example, an Amazon Dash integrated into a Brita water container can re-order new filters as soon as it detects that the current filter is expired. The device uses Amazon's payment service to execute the transaction and communicates with Amazon's fulfillment centers to deliver the new filters.12

One of the more valuable aspects of the Amazon story is that it highlights the value of innovating forcore operations as well as entering new arenas.

Integrated Amazon solutions include: New products/expand KindleNew Products/New markets: Amazon fresh, AWS, Fire PhoneExisting product/existing market: One-click checkout, drone delivery, collaborative filtering recommendations, PrimeExisting Product/New Market: Affiliate marketing

Amazon DashAmazon Web Services (AWS) is a managed cloud platform that lets connected devices easily and securely interact with cloud applications and other devices. The platform, which is launching in beta, will be able to support billions of devices and trillions of messages, and can process and route those messages to AWS endpoints and to other devices reliably and securely.

Simply put, Amazon has a smart front end to connect to its AWS backend with a ton of data it can exploit. Google is another contender, but the Google Now, On Hub and Nest connection is a bit fuzzier.13

DISNEY MAGIC BANDS PROVIDE COMPLETELY PESONALIZED EXPERIENCES THROUGH LOCATIONAL GUIDANCE, FAST PASS BENEFITS, ROOM AND PART ENTRY, PERSONAL ENGAGEMENT.

FUTURE MAY BE PHONES WITH ALL OF THE SAME CAPABILITIES.14

Apples AirPods are just wireless headphones about as much as the Apple Watch is just a watch and iPhone is just a phone. Nothing makes this more apparent than the Siri experience.

It is remarkable how much better Apples Siri experience is with AirPods. In part because the microphones are much closer to your mouth and, therefore, Siri can more clearly hear and understand you. Im not sure how many people realize how many Siri failures have to do the distance you are from your iPhone or iPad, as well as ambient background noise and the devices ability to clearly hear you.

The first near-field #VoiceFirst device, AirPods have more computing power than the iPhone 1: total of 3 Cortex SoCs. Big possibilities.15

Alibaba Group introduced VR Pay, its virtual-reality payment system that allows virtual reality shoppers to pay for items just by nodding, according to Reuters.

This payment system will be incorporated to virtual online marketplaces, which will simulate the experience of shopping in a physical store by using a VR device, such as helmets or glasses, at home. VR Pay, which is expected to be launched e by the end of this year, allows users to make purchases without the hassle of taking off the goggles or helmet, which makes for a much more seamless payment process.

Alibaba could potentially look beyond China, the US market appears to be very receptive to VR shopping capabilities, with 74% of US shoppersanticipating that the implementation of VR into e-commerce will end up impacting their buying decisions,according toa surveyfrom Walker Sands.This is especially important as e-commerce continues to grow in the US, with BI Intelligence forecasting that US e-commerce sales will hit $631 billion in 2020, up from $341 billion in 2015.

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Prototypes of payment-enabled clothing like gloves and dresses have been tested by MasterCard in partnership with designer Adam Selman.17

Consumer IoT goes far beyond devices controlled by the consumer. IoT is about devices talking to devices. Payments are being integrated into smart home devices to help consumers automate theordering of essential goods and manage expenditures for energy, monitor the insurability of a home and much more.In a smart home, the entire environment talks to each other.

We expect the smart home market to continue to grow slowly but steadily over the next five years as prices drop, old household devices need to be replaced, and the technological fragmentation problem is fixed.

3% of smart home devices shipped in 2016 will have payment capabilities. By 2020, that will grow to 10%.Over time, a growing portion of global appliances and entertainment devices sold will have internet capabilities integrated into them. Further, more mundane devices, such as cleaning products, paper towel holders, water pitchers, etc., will be introduced with integrated payment capabilities that allow the product maker to cross-sell products and services and to include repurchasing.

Overall, millennials continue to drive voice adoption within the smart home.In its2017 Smart Home Marketplace Survey, Coldwell Banker asked US consumers of all ages whether they own a smart home device that incorporates voice control. Fifty-eight percent of millennial respondents (aged 18-34) indicated they owned a connected home device that was controllable via voice.Among members of Generation X (aged 35-54), 50% indicated they owned at least one smart home device that integrated voice control.

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MasterCard and Samsung introduced a smart refrigerator at this years CES that includes an embedded tablet that can process andsend grocery orders tovarious grocers (or for immediate delivery by Amazon). Although this device is convenient, its high price point, coupled with long upgrade cycles on refrigerators, suggests that the device won't see wide adoption in the near term.

The Groceries shopping cart will also learn a familys shopping habits, making personalized suggestions on items and brands. New features will continue to roll out, including recipe and video integration.

The potential next step, the connected pantry.

2014 Microsoft Corporation. All rights reserved. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.1/19/17 06:4319

The Amazon Echo (and associated devices) were the #1 selling electronic item over the last holiday. Its a tubular speaker integrated with a voice assistant, similar to Apples Siri. Although it originally handled more basic requests, it now allows Capital One customers to pay their credit card bills through an integration with the bank.This could help popularize voice-activated payments because of the low friction.

Baby Boomers (aged 55+) were the least likely among respondents to own a smart home device with voice integration; only 26% said they owned such a device.

But while younger Americans are primarily driving adoption, all age groups seem to recognize the convenience that hands-free control brings.Among all age groups surveyed, 30% indicated hands-free control is the most appealing benefit of voice-controllable smart home devices, 17% cited increased user-friendliness, and 14% said flexibility in location.

Impact on marketing: brand/product stories must be discoverable by AI. If you ask Alexa (or Siri or Googles smart assistant) to purchase a product, but she doesnt find it, thats a problem for your brand. Additionally, brand assets need to contribute to a positive data story. The example Norman gave went something like this: Consumer: Alexa, order this product from Brand A. Alexa: Okay, but did you know that Brand B has higher ratings and is on sale this week for $1 less? The difficulty is being Brand A, and having your customers diverted away from a purchase by AI.

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Uber currently uses machine learning algorithms to analyze the wealth of data it collects on its customers and their rides to help it optimize and anticipate routes, as well as provide more accurate information about pickup times and locations.

Uber recently emailed customers about its new app, notifying them of the apps capability to predict where theyre headed, based on past behavior.

In December, Uber announced it would acquire AI startup Geometric Intelligence to help create Ubers AI Labs. Its a step toward Ubers longer term goal of implementing self-driving cars, and may also help improve Ubers existing services. 23

Card networks view the car as a key hub for powering commerce.Cars are becoming connected to the internet through mobile networks, creating an opportunity for transactions to be enabled on these internet-connected platforms. In-car payments could be a compelling use case because they add convenience for drivers and could help them multi-task more effectively. For example, someone could pay for parking or fuel using a voice-activated app synced with a car's digital dashboard system.In-car payments enable the purchasing of digital goods through the apps and operating systems housed on the cars infotainment center.

381 million connected cars will be on the road in 2021. 94 million connected cars will ship that year that equates to 82% of total new cars shipped, up from 13 million shipped in 2015.And consumer usage of the connection within cars is rising fast. By 2021, we expect that roughly half of the connected cars on the road will be attached to a mobile data subscription plan paid for by the cars owner.

Visa is also testing connected payments options related to essential services like fuel and parking.Fuel payments:Visa partnered with ParkWhiz to let Honda drivers pay for their gas using Visa Checkout on the car's dashboard.Parking:Honda drivers can also use the ParkWhiz app to pay at any meter in ParkWhiz's networkbased on the exact duration they were parked.

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Consumersembrace a personalized shopping experience. Consumers wearing devices such as an Apple Watch canreceive individualized information based on the data stored on their device, their existing consumer profileor sensorsat the retailer. Price tags are digital and can be adjusted to offer individual discounts adding multiple impulse purchase moments.

Loyalty programsMembership rewardsSegmentation-based offers

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New point of sale (POS) locations pop up. Of course, consumers shop virtually from their mobile phone, tablet or computer but what about other locations? In a pilot, a SOUTH Korean supermarket chain covered subway stations with images of supermarket shelves containing hundreds of items.Consumers wanting to do their grocery shopping could scan each products Quick Response (QR) code with their smartphoneand addthem item to their virtual shopping cart. Items were then delivered to their home address.26

FingerprintIrisPulseWallet (payment card, phone number, handprint then hand thereafter.

Security is paramount in todays ever more digital world. Yet it would be great to remove the frustration of remembering all your passwords, or getting locked out of your own account for failed login attempts. With heartbeat payments and facial recognition technology on trial in the Netherlands and the U.S., authenticating payments with our face, fingerprint and heartbeat will soon be an everyday reality. Such use of technology and data moves away from relying on what the consumer knows (passwords), to what they have (mobile smart devices) and who they are (biometrics) while raising the bar on security.

EMVChip and PinBiometrics#D secureTokenizationE2E encryptionGeo locational trackingReal time analytics29

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