Digital Disruption – turning a whale into a dolphin

Mobey Forum - December 2013

HIGHLY RESTRICTED A little about the HSBC Group

Purpose, Strategy and Values

• Founded in 1865 to finance trade between Asia and the West, today HSBC is one of the world’s largest banking and financial services organisations serving some 55 million customers. Our aim is to be acknowledged as the world’s leading international

• Through the four Global Businesses: and Wealth Management, Commercial Banking, Global Banking and Markets, and Global . Our network covers around 80 countries and territories in Europe, the Asia-Pacific region, the Middle East, Africa, North America and Latin America

HIGHLY RESTRICTED HSBC Group - 5 regions, 54 countries

Asia PAC • Australia • Bangladesh • Brunei Darussalam • China • Hong Kong • India UK • Indonesia • Japan North • Korea America • Macau • Malaysia • US Hong • Maldives • Canada Kong • New Zealand • Pakistan • Philippines • Singapore Europe MENA • Sri Lanka • Taiwan • Armenia LATAM • Algeria • Thailand • Channel • Bahrain • Vietnam Islands • Egypt • Argentina • France • Jordan • Bermuda • Greece • Kuwait • Brazil • Isle of • Lebanon • Cayman Man • Mauritius Islands • Kazakhstan • Oman • Chile • Malta • Palestinian • Colombia • Poland Autonomous • Mexico • Russia Area • Paraguay • Slovakia • Qatar • Uruguay • Turkey • Saudi Arabia • UK • UAE HIGHLY RESTRICTED This presented a number of development challenges…

Bespoke and separate back-end systems | Multiple instances of PC Banking

57

complexity cost timescale

HIGHLY RESTRICTED FutureState Architecture Fulfillment Integration Presentation Devices Device asynchronouslyDevice Device minimizedDevice Device hasDevice added full page refreshfull applicationlogic access data

Internet -

Vision

Mobile HIGHLY RESTRICTED HostSystems

All shareAll a set of common

transaction complexity options depending on dependingoptions may have different UI havemay different Make useMake common of Different integrationDifferent channelprocessing Different Differentdevice

utilities Branch

Call Center

ATM

Mobile is up and running…

HIGHLY RESTRICTED Adoption is growing rapidly…

Launched : April 2013

Launched : August 2013

Launched : December 2012

first direct only

HIGHLY RESTRICTED We are on a journey to catch up and take the initiative…

Functionality

Basic functionality

Web optimised Partial

3rdPP – existing payee

3rd PP – set up new payee

Inter account transfers

P 2 P

NFC

Mobile Wallet

Source: eBenchmarkers Multichannel Performance - September 2012 HIGHLY RESTRICTED Delivering a Connected Banking Experience

Multi-channel

Customer centric MTP Launch Single ID&V Multi -channel - Channel Agnostic Customer enablers True CRM Offers offers Online Document Top 10 Journeys – Repository fundamentally redesigned Raising the bar Intelligent web Multi functional self Upstream Integration assistance service capability Search Foundation Digital CRM Bespoke Tablet Peer Review Stones E2E Top 5 journeys Tablet Optimised Applications (Sales) Experience Mobile Payments E2E Top 5 Journeys Tracking MI Online Online, P2P and POS Global Platform (Service) Videoconference in - Mobile Banking Cross channel Branch - Tablet Banking appointment booking Integrated mobile P2P Capability authentication Authentication

HIGHLY RESTRICTED Now let’s turn black & white…

HIGHLY RESTRICTED 10 Barry - The Platypus .

http://www.youtube.com/watch?v=L3D9l4GB8HM

HIGHLY RESTRICTED 11 We’re currently in a good position – but this will decline if we do not match and exceed the expectations of our customers

Overall Satisfaction Satisfaction with recent CHANNEL EXPERIENCE (taking everything into account)

Overall Score Telephone Score Internet Score Mobile Score first direct 92.4% first direct 88.9% first direct 93.8% Nationwide 85.8% Nationwide 77.7% Nationwide 71.7% Nationwide 87.4% NatWest 84.4% 68.1% LTSB 62.6% NatWest 87.3% first direct 84.2% 67.3% Santander 60.4% Halifax 85.6% Barclays 83.5% NatWest 67.1% HSBC 59.7% Barclays 84.0% Santander 79.7% LTSB 65.5% Halifax 55.8% Santander 84.0% LTSB 76.0% HSBC 65.0% Barclays 55.7% LTSB 83.9% Halifax 71.7% Santander 62.5% NatWest 54.4% HSBC 82.0% HSBC 71.7% Comp Avg 67.9% Comp Avg 59.8% Comp Avg 85.3% Comp Avg 80.2% HSBC confidence HSBC confidence HSBC confidence interval: + / - 4.3% interval: + / - 2.5% interval: + / - 3.9%

Source: Charterhouse CCS 6m/e Oct 13 (main bank customers, contacted in last 48 hrs /1 week for telephone), HSBC Base: Overall: 2062, Branch 543, Telephone: 345, Internet: 529 Mobile: 382 , * Please note that confidence intervals are based on 90% confidence level. This First direct Base: Overall: 593, Telephone: 216, Internet: 276, Mobile: 101 means that we can be 90% confident that the true answer lies somewhere between Comp Base: Overall: 12400, Branch: 3375, Telephone: 1992, Internet: 3253, Mobile: 2335 the result + / - the confidence interval. HIGHLY RESTRICTED 12 Digital is the backbone of the first direct business. We have always responded to digital trends and customer needs.

High Digital Engagement Tech Savvy High Expectations Our existing and growing base are highly Our customers interact with us via a variety of Our existing customer base has high expectations digitised and demand for mobile is growing channels – and we openly co-create with and our digital proposition must satisfy their and customers via the first direct Lab. new customers needs. first HSBC Digital Metrics direct UK TGI profiling data – first direct customers over index on the following attributes Active base - registered 86% 48%

Active base – digital active 64% 36% • They expect more Digital Contact (Inbound) 92.1% 82% • Innovative • Income rich, time poor Digital Sales as a % of total 55% 32% • Bright and well informed CSAT (internet banking) 94% 82% • Ambitious and confident • Individualistic and cosmopolitan Mobile Active 22% 2% / 9% • In control Mobile device PWS visits 33% 19%

TMB registrations 44% 1.5% HIGHLY RESTRICTED 13 Customer expectations in digital change rapidly – first direct risks falling further behind…

Current Customers Future Customers They have new motivations and deal breakers “Quite simply, When is “The phone service is fantastic, going to be “My daughter the online banking is becoming They are the ‘now’ generation written for 2012, rather than dated. Work on it.” wants everything stuck in 2002. It’s woefully yesterday, She’ll behind the curve.” Source : fdlab Sept 2012 • They expect services to be instant pay to get stuff • They expect services to be effective quickly” • They expect to be informed

“I hate it when “Sometimes even “The customer service is great, however the they can’t tell “My bank app online doesn’t online content and functionality appears to you what’s is rubbish-it work well have remained unchanged for many years.” wrong.” wastes my enough.” time.”

They are easily frustrated when they don’t get instant satisfaction Source : Hall & Partners. Brand research – Deviation. Nov 2012 Competitive Response first direct and HSBC UK – PWS visits by device type 2011 vs. 2013 Smartphone Tablet “first direct core functionality benchmarks well but poor design and navigation is an issue”.

first direct first 67% of digital banking

customers in HSBC HSBC UK

the UK are now benefitting Source: WebTredns from a redesigned online banking experience. Mobile > ADOPTION • Almost 1 in 3 PWS visits now come from mobile Source : eBenchmarkers. Sept 2012. • fd App– Over 400k downloads • fd – over 30% of active IB users used the App at least once.

HIGHLY RESTRICTED 14 Our mobile and security transformation journey is underway…

HIGHLY RESTRICTED 15 Thank you

Any questions ?.

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