1. SUN in Financial Services BANKSETA Shaping up to Global Banking Nigel Woodward: Global Segment Manager MAY 20 2003

2. 2June 18, 2002 Agenda Automation in Banking in Developing Countries - Global market overview - Macro trends - Contemporary challenges - Segment value chains - Scenarios - “Northern hemisphere” context – South Africa – relevant lessons to be learnt - Retail - Wholesale - Technology implications - Managing the market - Dispelling myths - Foundations to be laid

3. 3June 18, 2002 The South African challenge Not lessons, but useful watchwords Retail Growing newly banked demographic profile Developing infrastructure Mix of needs – commodity retail – wealth management Education opportunity Wholesale Full functional scope Corporate banking to securities Need to take best practice models Electronic – automated backdrop

4. 4June 18, 2002 E-Business is reshaping retail securities broking … and institutional E-Business is quickly emerging Margins down = cost down with IT and ops &/ or volume up to maintain profit with brand …but Internet commissions are plummeting ‘96‘97‘98 Dollars Average commission charged by top 10 online brokers 0 15 30 45 60 Source: Credit Suisse First Boston Accounts (millions) Assets ($ billions) Accounts Assets Retail Internet Brokerage Forecast anticipates significant growth... Source:Forrester Research, Tower Group, PwC analysis Looking to the future you have to be a low(est) cost producer

5. 5June 18, 2002 Where are we today - Retail ? - Dot.com is dead, long live dot.com - Ridiculous business propositions – but have taught us -“e” or is it “i” - Does the e customer exist – he is everywhere … and emerging in RSA new demographic behaviours - Existing business processes are challenged - The status quo is not sacrosanct - Barriers to entry are down, new entrants can appear ….

6. 6June 18, 2002 Retail continued …. Late 90’s new entrants have not survived – lacked full product scope, e not enough on its own - electronic delivery channels for established banks are now a given Specialist value propositions – technology enabled niche plays have appeared Branch has survived the electronic onslaught – USA branch renewal focus, behaviour indicator Personal finance links to trusted brands and establishment High end being siphoned off from mass market – cost reduction economies of scale mergers Challenge – If you’ve got process efficiency turn to service edge (at lower cost) - If you haven’t – catch up fast How broad is my business … Group structures – product lines – production and distribution synergies Financial Services STOVEPIPES…. The e customer doesn’t want to see these

7. 7June 18, 2002 Wholesale market Corporate banking, trade finance, securities and capital markets Cost Cost Cost – Efficiency Efficiency Efficiency STP …. Risk Management Trading Infrastructure

8. STP – a market ecosystem

9. 9June 18, 2002 While T+1 is on the shelf the industry will still spend $5.9 billion on STP in next 3 years North American Securities Industry IT Spending on STP (US$ billions) Source: TowerGroup estimate $1.5 $1.8 $2.1 $2.0

10. 1010 June 18, 2002 The Key STP Pieces  The Transaction Pipeline  Core Systems  Risk Management  Market Connectivity

11. 1 June 18, 2002 Customer Challenges Internal Front Office Back Office Middle Office Front Office Multi-instrument Organic growth Middle office Multi-divisional Evolutionary Back office Multi-location Deals, transactions, messages

12. 1212 June 18, 2002 Cost reduction – process improvement Standards based messaging – ubiquitous adoption - Market responsibility FIX – 4.4 equities – fixed income, SWIFT and ISO 15022 Intermediary functions Settlement - Omgeo Execution - ECNs Routing - Easyscreen e de facto enabled – Technology cost of ownership Next generation trading infrastructure – web MDDP – TIB, Triarch, RMDS Corporate payments – MA-CUG – Portal delivery Trustact security MT103 and 103+ November 2003 replacing 70/75 SWIFT IP 2004 … new service and automation models South African wholesale market displays all these characteristics

13. 1313 June 18, 2002  Market risk  - Front Office  - price feeds/trading platforms  Credit/Counterparty Risk  Institutions - global  Sovereign  AML – Know your Customer …  Operational risk  Fundamental business processes  Basle 2 … 2006, Sarbane Oxley …… regulatory driver global consistency  Systemic risk – the market itself – CLS, RealTime Nostro Risk Management

14. 1414 June 18, 2002 Automating the trading cycle will enable firms to do more with less.. Taking out cost at all possible points

15. 1515 June 18, 2002 Structural implications of Financial Service delivery … Blurred lines of demarcation Developing markets Execution in an e environment

16. 1616 June 18, 2002 What business are we in … Retail, Wholesale, both? complex overlaps and market practice Sell side investment Corporate Custody Private Banking Retail Buy side Asset Mgt Execution

17. 1717 June 18, 2002 Are we working the linkages …aware of the sub drivers, synergies, economies of scale? Sell side investment Corporate Custody Private Banking Retail Buy side Asset Mgt Execution

18. 1818 June 18, 2002 Dynamics – what the (e) customer wants? Sell side investment Corporate Custody Private Banking Retail Buy side Asset Mgt Execution

19. 1919 June 18, 2002 Dynamics – what the (e) customer wants? Sell side investment Corporate Custody Private Banking Retail Buy side Asset Mgt Market access Best price Soft services Risk protection Institutional Long term performance Information/risk strategies Retail Short term return Low fees Efficient processing shop Market advice Outsource buy side Technology soak - SWIFT Global trade, ePayments+ TrustAct, Bolero Order to pay Debt markets Complexity translated Market price Day to day service Where & when wanted Channels No frills No cost Cross product Premium service All these at reasonable costHow many hidden in Retail $ 300Bn-25Tn 2001- 2005 Execution Price transparency

20. 2020 June 18, 2002 e doesn’t recognise organisational stovepipes? Sell side investment Corporate Custody Private Banking Retail Buy side Asset Mgt Market access Best price Soft services Risk protection Institutional Long term performance Information/risk strategies Retail Short term return Low fees Efficient processing shop Market advice Outsource buy side Technology soak - SWIFT Global trade, ePayments+ Order to pay Debt markets Complexity translated Market price Day to day service Where & when wanted No frills No cost Cross product Premium service All these at reasonable cost How many hidden in retail -Organisational linkage - Shared technology -Cost efficiency - SERVICE ENHANCEMENT Execution

21. 2121 June 18, 2002 Therefore the issue is how to reach the customer and with what products Multi channel delivery Product transparency Retail - Demographic integration Wholesale - Operations integration

22. 2 June 18, 2002 …. Through the looking glass ….architecture Legacy Core Systems Service delivery – meeting the challenge From manufacturing plants To customer behaviour

23. 2323 June 18, 2002 …. Through the looking glass ….architecture Legacy Core Systems Recognizing end to end topology Channels e Channel Management e Processes e Infrastructure

24. 2424 June 18, 2002 …. Through the looking glass ….architecture Integration/Information Bus/Messaging Components J2EE Claims Loans Credit Cross sell CRM Aggregationl Collab/ Community/ portal/LDAP Security Java J2SE Internet Phase 1 E-Presence Web server firewall Phase 2 E-Function Incremental new business functions Phase 3 E-Infrastructure Middleware Legacy connect Infrastructure Phase n Core Processing Core replace Consolidate Extend Call centre J2ME Mobile Digital TV Branches Channels e Channel Management e Processes e Infrastructure Legacy Core Systems SUNOne Architecture XML-JMS/JCA SIntServer LDAP Apps Server Web Server F/Wall- DMZ SUNOne - Architecture +Functions working organism RDbms LDAP Retail outlets

25. 2525 June 18, 2002 Exchange ECN Internet Web server ASP Netting Affirmation Exception reporting Matching technologies Intermediar y Private Client 2 Fund 3 Manager 1 Market Sell Side Buy Side - securities Trade 5 Sales Execute 6 Manage Risk 7 Settle 8 Monitor STP 9 4 Model FI Proving the concept - securities Random Walk F-fusion -Heterogeneous technologies influence -Big ISV brands and small innovators -J2EE architecture binds – JMS, XML FIX communicates -J2EE - JCA op ….. Leverage - so what can we do/facilitate for you …? B2BITS Proving the concept … New York, California, London, Johannesburg ? Pacemetrics Oracle Reuters

26. 2626 June 18, 2002 … some technology commentary ….

27. 2727 June 18, 2002 Organic growth – vision impediment

28. 2828 June 18, 2002 Chipset O/S Solaris/Linux Platform foundation Storedge JCA/JMS Architecture Messaging Rules/exception Middleware Platform optimisation services, “ilities” Peripherals Architectural compliancy/strategy services J2EE architecture Functional support SUNone Risk application analysis Partner community iForce Applications Operations audit Technology infrastructure Infrastructure audit Partner community iForce Services Business processes Audit/Compliance Operating system – fit for purpose Sparc/Intel Core business Consulting services Selection/installation/ Functional integration Business Technology SUNONE + Partner community iForce Business Operations

29. 2929 June 18, 2002 … What do we want from technology – the myths? - Beware Solutions – second most abused term after “partners” - Optimised cost ( not necessarily lowest ) - Flexible – to business change and open supply market - Market is shifting – evolution into revolution perhaps - SUN Microsystems Java – 1995 response to proprietary lock in (Unix in 1980s, Java in 1990s) -Java language and J2EE architecture – Retail J-XFS, Capital Mkts – JoW established -SUNONE Webservices (standards and interoperability)

30. 3030 June 18, 2002 …. Continued -Legacy systems – High organic investment cannot replace – need to evolve - re architect …. But need ROI, sounds expensive – seek interim deliverables approach - start topological environment approach - make v buy, now make and buy, know what and why you are doing it - OO …. Java opens the way forward – makes sense - Small is probably beautiful, big may not be – new selection and project management skills - Manage innovation -Work the commitments to partnership, - Play to core competencies – take advice from where it should come from Get navigation round the buzz and fashion!

31. 3131 June 18, 2002 Technology is the easy part …. Good luck …… Give us a call, we have a lot of friends ! Thankyou

32. 3232 June 18, 2002