1. © 2016 International Business Machines Corporation 1 New Generation Bank: Both Digital and Cognitive Andrey Filatov, IBM Country General Manager, Russia and CIS

2. © 2016 International Business Machines Corporation 2 Wealth managementRetail banking Customers do not feel they receive a personalized experience, and are not inclined to be loyal Bankers believe they are meeting customer needs while customers do not agree

3. © 2016 International Business Machines Corporation 3 ? Customers identify multiple frustrations with banks, non-traditional competitors look for ways to tempt customers to switch Top frustrations that drive customer dissatisfaction with their banks Offering something new and different - non-traditional competitors increasing their market share Regional banks Local banks Global banks Retailers Telecommunications companies Technology companies % of banks that agree Which of the following do you consider your organization's most important competitors?

4. © 2016 International Business Machines Corporation 4 Banks and fintechs possess complementary attributes  Large customer base  Access to low cost capital  Time-tested core banking systems  Deep industry experienced workforce  Innovative customer experience  Lower operating costs  New Digital technology  Technology-savvy workforce Antagonist or ally?

5. © 2016 International Business Machines Corporation 5 The most successful banks will become an integral part of customers’ everyday lives The most successful banks will ‘own’ their customers’ experience, orchestrating all of the component parts on behalf of the customer Mobile payments Mobile wallets Crowd funding P2P Lending Crypto currency  Unlike fintechs, banks have the customer relationships −Traditionally banks realized value in delivering specific banking functions or services −But fintechs are already leveraging new technologies to compete against banks in these areas −In future, banks’ value will be centered around the quality of customer relationships they maintain Customer Bank Lending Transactions Payments Branches ATMs Trading Investment Savings Marketplace Retail Ticketing As banking services become readily replicable, banks’ need to reevaluate their notion of value- which in future will be tied to managing the customer engagement

6. © 2016 International Business Machines Corporation 6 Acquisitions Westpac’s Reinventure Group, a $50 million fund set up to back start-ups, made a $5 million investment in a peer-to- peer lender SocietyOne Venture capital Accelerator programs In house development Deutsche Bank is working with technology partners to kick- off three innovation labs, as part of a five-year plan - Strategy 2020 comprising €1 billion of digital initiatives Trend in which banks collaborate with tech companies on fresh ideas as banks seek to stay competitive and relevant. Citibank launched a global virtual competition (City Mobile Challenge) to bring together developers and leading technology sponsors to build the next generation of fintechs Tangerine partnered with fintechs and startups for creating banking applications using a cloud-based development environment Partnerships Source: see details in speaker notes BBVA acquired a stake in Simple – a start-up bank – to accelerate their ability to address Millennials through a modern mobile banking experience Entrepreneurial banks are already partnering with or acquiring fintechs to capture complementarities and expand capabilities

7. © 2016 International Business Machines Corporation 7 SoE User-centric systems providing convenience to the user. SoI Analytics based systems, In the data flow providing real time SoR Data-centric systems, providing business support. The new IT systems paradigm Source: IBM Global Technology Outlook 2014  High value Cloud  Cognitive Services

8. © 2016 International Business Machines Corporation 8 Cognitive Bank: Expectations and Actions 79 % 88 % executives familiar with cognitive computing are likely to invest in cognitive computing in future Improved customer engagement Engage New areas of productivity Discover Better decisions Decide …of bank executives familiar with cognitive computing believe it will have a critical impact on the future of their business …of bank executives familiar with cognitive computing believe it will play a disruptive role in banking

9. © 2016 International Business Machines Corporation 9 Thank you! Andrey Filatov, IBM Country General Manager, Russia and CIS