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Supporting Business Agility in a Connected World The Future of Corporate Banking

The digital banking landscape

Market trends Challenges & opportunities

Digital transformation with HID Global

Introduction

The banking world is entering a new era. The power of technology, shifting customer demands, and regulatory challenges are changing the way banks serve corporate customers.

To stay ahead of the competition, banks need to focus on increasing efficiency, competitiveness, and long-term profit. They are expected to be innovative, agile, and build sustainable strategies while embracing open banking initiatives; create intuitive connected experiences, and offer alternative or multi-channel approaches. The banks that get it right, will move away from a silo-based model to meet the customers demand, at the point they want it – and offer supreme security.

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Disruptive Market

Everything flowing through today’s banking market is connected by technology, and the critical role security plays in the way data and assets are protected. Customers need a trusted source of identification, and intuitive services to enable them to transact securely. Regulations are redefining the way information is used, stored, and shared, while financial institutions are looking for ways to balance security, user experience, and seamless access to data.

Additionally, the financial services market is shaped by broader world trends, such as:

• Industry 4.0 where people, places and things are connected through technology

• Connected world in which the link between people and increasing amount of information becomes almost invisible through digital, social and mobile channels

• Ecosystem banking becomes an alternative for delivery of financial services through innovative channels, user friendly products and strategic partnerships

All of this is going to change the role of banks. They have a unique opportunity to position themselves as a trusted identity provider, and a fraud risk manager, either within an ecosystem or standing alone in their quest for new revenue streams while reducing operating costs and risk.

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Market Trends

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Growing Fraud Trend 1

Fraud is growing. Current forecasts put the cost of cybercrime at $6 trillion by 2020, while the fraud detection and prevention market is expected to grow from $17 billion in 2017 to $42 billion by 2022 1.

In response to the rise in criminal activity, there is a rising awareness of the problem, and an understandable demand from banking customers, shareholders and regulators to increase security.

The pressure to secure corporate customers’ information has never been higher, and so for financial institutions looking to integrate technology into their service offerings, fraud is one of their biggest challenges.

Investing now in security approaches like real time risk assessments, encryption, and adaptive security, will pay off in the long-term as trust will increasingly become one of a bank’s most important assets.

If customers trust a bank, they will be more likely to use future services, like digital channels, where banks have opportunities to offer new and innovative products, that will increase revenue and reduce costs.

Drivers Financial institutions are increasingly vulnerable to fraud from the rise of digitization, new technologies and growing connectivity. At the same time, cyberattacks are becoming more sophisticated, increasing the risk and seriousness of incidents and data breaches. Unfortunately, many in-house IT teams lack the right expertise to deal with these threats.

$6T4B 50B

Devices connected to the internet

by 2020 2

Cybercrime cost by 2020 2

People online by 2020 2

45%

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Market LandscapeTrend 2

Banks are operating in a shifting landscape. Some of the challenges they face include competition, social media changing the way they communicate with clients, and their very nature potentially evolving if we move to ecosystem banking.

In response, banks are exploring partnerships with fintechs, real-time access to data, the creation of more personalized services and ideas like:

• Innovative digital services – to provide added value services, and better serve customers

• Opening APIs to 3rd parties – to help create new revenue streams, which could potentially boost both top and bottom lines

• Banking as a Platform (BaaP) – this new business model turns a bank into a one stop shop for customers who will get core banking alongside innovative apps created by fintechs

These new services, business models and partnerships are giving banks the extra dimension they need, combined with the customer base, trust and stability they already have, to position themselves as ID providers in a hyper connected world.

$8B

Global social media users in 2017 4

of people visit their local branch fewer than five

times per year 5

Global fintech funding first eight months

of 2017 3

3B

Drivers Open banking and open APIs are driving new business models that banks should incorporate into their strategies moving forward. This new approach will boost organizational efficiency while reducing operational costs and create stronger customer experiences.

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RegulationsTrend 3

In the last 20 years banks have dealt with everything from anti-money laundering rules, and the Dodd-Frank Act, to the Basel series of regulations, and today they are confronted by PSD2 and GDPR.

However, the impact of regulations vary from region to region, with different rules being implemented at different times – potentially creating an unlevel playing field for the global industry. For example, European and Asian regulators are putting in place different capital conditions, so banks in the different regions must operate in different ways and face different issues in their decision-making processes.

All of which highlights the importance of approaching compliance in the right way. If it is seen as a box ticking exercise to satisfy a regulator, it is purely a cost. On the other hand, if regulations are instead viewed as an opportunity to implement new business models, boost efficiency and effectiveness – it can push banks to be more client-centric, and possibly be more profitable in the long term.

Drivers The financial crisis of 2007/2008 is still driving a stronger will for protection and risk mitigation, including anti-money-laundering and anti-terrorist-financing measures. This has hit banks’ revenues, capital expenditures and return on equity, making it critical that banks strive to improve efficiency, and effectiveness.

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Customer Authentication RegulationsTrend 3

Comisión Nacional Bancaria y de Valores

Superintendancia de Banca, Peru

European Commission

Central Bank of Nigeria

Saudi Arabian Monetary Authority

Australian Prudential Regulation Authority

Korean Internet & Security Agency

Hong Kong Monetary Authority

Monetary Authority of Singapore

As cyber-attacks become more sophisticated, it is vital that banks have the right security in place to protect the identities, information, and ultimately, money of customers that use digital banking. Many regulatory bodies are putting rules in place to make sure banks use two or even multi-factor customer authentication to improve security and reduce attacks.

Federal Financial Institutions Examination Council

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Employee Authentication RegulationsTrend 3

It is not just customer data that is vulnerable to criminal attacks, employee credentials can also be stolen and this could open the door to fraudsters and provide them with access to customers assets. Regulators around the world are working to safeguard corporate data and reduce external and internal attacks, prevent fraud and to protect personal information.

GDPR Data Protection,Europe

New York State,Department of Financial Services

Federal Financial Institutions Examination Council

Marco Civil da internet,Brazil

Challenges – Building Sustainable Strategies

The digital banking revolution is giving the banking industry a range of challenges – from technology, and security, to new channels, and entrants to the market. The way banks address these challenges will inevitably define the way they provide a better service to their corporate customers.

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Deploying the right technology in the right way and avoiding costly mistakes

Building the right new capabilities to develop a competitive differentiator

Innovation

Competition

Creating the adequate tools necessary to comply

Compliance

Building adaptive multi-layered solutionsIncreased fraud

TRENDS CHALLENGES

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Opportunities – Owning the Digital Identity

Despite a difficult global landscape, there are still many opportunities for progressive banks who embrace the digital transformation. In the digital revolution, information is the key to success, but organizations need to properly secure it – and customers are willing to trust financial institutions that will stay secure.

Financial organizations already have huge amounts of information on their customers, they are already trusted to secure that information and they have unrivalled access to corporate clients. Therefore capitalizing on historical trust along with investing in secure technologies to boost stronger stickiness will enable banks to develop sustainable growth strategies in the future and capitalise on them.

Banks have unparalleled access to corporate clients

Banks have strong expertise in risk management

Banks are trusted advisors to their clients

Banks provide payment and account infrastructure

Banks can improve efficiency, partly due to the decreasing cost of compliance programs

OPPORTUNITIES

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Digital Transformation with HID Global

Adaptive Security and Intelligence-based Authentication

HID Global helps financial institutions navigate the digital revolution by securing their most valuable assets.

Our approach enables financial institutions to offer convenient and highly secure multi-factor authentication for online and mobile access to accounts through trusted transactions while protecting identities and combating fraud.

Our platform is pluggable and designed to support future strategies while providing scalable way to adapt to evolving authentication methods.

In a landscape of evolving threats, banks should embrace regulatory changes and complexities to build a competitive differentiation. The most secure banks, that contain risk and protect their customers, while having the right business agility to respond to opportunities, will be the winners in the connected banking world.

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Fast and seamless approval process for transactions.

Each executive receives a notification in their HID Approve application enabling them to approve a transfer simply and easily.

Use Cases

Smooth and convenient money transfer to multiple recipients.

The process is smooth and secure, saving time and therefore increasing organizational efficiency.

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Operational optimization

Simplifying internal processes

Transaction signing

Secure validation of transfers.

Transfers are validated securely and efficiently, and can be approved with just a swipe of a finger.

HID Approve® is an easy to use, multi-factor identification and verification solution for mobile devices. It is versatile, easy to set up and allows organizations to empower employees, improve operational efficiency and improve security and convenience when processing trusted transactions.

Hello Jane

Please validate your online logon request

Decline

Approve

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GET IN TOUCH

If you would like to find out how you can provide your customers with a more secure and convenient banking experience, you can now request a free consultation.

www.hidglobal.com

HID Approve™ActivID®

Threat Detection Service

ActivID® Authentication

Platform

Additional resources

The Role of Digital Identity in the Future of Banking (white paper)

Going a step further with digital identity (video)

Retail Banking - Navigating the Digital Banking Revolution (eBook)

Wealth Management - Securing Your Customers’ Future (eBook)

Request consultation

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Sources1. Salgarkar R. (1 October 2017) Fraud detection and

prevention market is expected to hit 41.59 billion USD by 2022 Retrieved from https://www.whatech.com/market-research/industrial/376412-fraud-detection-and-prevention-market-is-expected-to-hit-41-59-billion-usd-by-2022

2. Boden P. (January 27, 2016) The Emerging Era of Cyber Defense and Cybercrime Retrieved from https://cloudblogs.microsoft.com/microsoftsecure/2016/01/27/the-emerging-era-of-cyber-defense-and-cybercrime/

3. Verhage J. (July 25 2017) Funding for Fintech Startups Poised to Hit a Record in 2017 Retrieved from https:// www.bloomberg.com/news/articles/2017-07-25/funding-for-fintech-startups-poised-to-hit-a-record-in-2017

4. Brett Williams (August 07 2017) There are now over 3 billion social media users in the world — about 40 percent of the human population http://mashable.com/2017/08/07/3-billion-global-social-media-users/#5biLvX39aaqG

5. Pilcher J. (30 July 2012) The Branch Paradox: Consumers Say One Thing, Do Another Retrieved from https://thefinancialbrand.com/24671/branch-convenience-perception-vs-reality/

6. Wright W. (8 October 2017) Have we learned our lessons from the financial crisis? Don’t bank on it Retrieved from http://www.telegraph.co.uk/business/2017/10/08/have-learned-lessons-financial-crisis-dont-bank/

© 2018 HID Global Corporation/ASSA ABLOY AB. All rights reserved. HID, HID Global, the HID Blue Brick logo, the Chain Design and HID, the HID logo, HID Approve and ActivID are trademarks or registered trademarks of HID Global or its licensor(s)/supplier(s) in the US and other countries and may not be used without permission. All other trademarks, service marks, and product or service names are trademarks or registered trademarks of their respective owners. 2018-02-15-iam-corporate-banking-eb-en PLT-03609