Digital Banking Fueling Digital Banking Transformation Contents 01

Digital Banking Fueling Digital Banking Transformation

Contents 01 Financial Services Transformation in the Internet Era 02 Digital Banking: Reshaping IT to Fuel Digital Transformation 03 Building an Ecosystem to Drive IT Architecture Transformation

Financial Services Environment in the Internet Era Customer Structure 20% 80% Profit Model Service Channel Undiversified Diversified profit sources Physical channel e. Channel Market Environment Internet finance Basel III

Financial Institutions Need Better IT Abilities for Digital Transformation Innovative services Online, remote, and interactive Agile business Fast and iterative development, updates, and upgrades Timely service response and accelerated innovation Intelligent analysis Real-time risk control, precision marketing, market insights, and refined operations Technological trends Open architecture x 86 and open-source software will prosper in the FSI. Open platform The industry ecosystem develops centering on banking platforms, allowing API economy with partners. Cloud infrastructure 95% of financial innovation will take place on clouds. Industry clouds will become new sources of income.

Contents 01 Financial Services Transformation in the Internet Era 02 Digital Banking: Reshaping IT to Fuel Digital Transformation 03 Building an Ecosystem to Drive IT Architecture Transformation

Huawei Digital Banking Solution Branch e. Banking Telephone banking Remote banking Mobile marketing Mobile banking Reshaping services: Omni-channel Banking Risk control Precision marketing Smart decision-making Reshaping data: Financial Big Data Intermediation Core banking Credit loan Accounting Credit card Wealth mgmt. Precious metal Payment High-Performance open platform Operating management Supervision Marketing Finance and report mgmt. Financial cloud Reshaping platforms: Financial Cloud Customer Challenges Channel: Traditional brick-and-mortar branches need transformation to support ubiquitous services. Data: Application scenarios are mostly post-event analysis. Platform: Traditional closed architectures have high costs, low agility, and long resource delivery periods. Customer Benefits Channel: Efficient, cost-effective customer acquisition and optimized business layout Data: Real-time Big Data analysis (pre-event, during-event, and post-event) enables precision marketing and risk control. Platform: Open architectures for normalized product innovation

RESHAPING THE PLATFORM: FINANCIAL CLOUD

Why Should We Use the Cloud? Unified device management A large bank may have tens of thousands of computing nodes, hundreds of storage systems, and a variety of software and hardware. These banks need smooth evolution to protect their investment. Faster service response Higher resource usage Time-consuming infrastructures delivery (> 3 months) slows down financial product rollout. Traditional IT architectures cannot flexibly cope with transaction surges, suffering a low resource usage of 30%. Automatic IT O&M Manual configuration brings massive workloads. Firewalls have 20, 000 policies that change 10, 000+ times every year. Other devices have even more policies.

Huawei Financial Cloud: Open IT Architecture with High Performance, High Scalability, and Easy Management Use: Automatic, on-demand resource allocation Management: Unified, efficient, and intelligent O&M Unified Maintenance Unified Operation Unified O&M Platform Paa. S Fusion. Stage Iaa. S Fusion. Sphere Open. Stack Resource pools in traditional IT architectures Resource pools in distributed IT architectures Server Unix server Kun. Lun (open architecture) Highly reliable resource pool Virtualized resource pool SAN Virtualized resource pool Storage resource pool NAS Fusion. Storage Virtualized resource pool Network Storage Physical machine resource pool New virtualized resource pool Construction: Unified framework, open architecture, and resource sharing

Recommended Cloud Transformation Path: Fast, Step-by-Step, from Peripheral to Core and Innovative to Traditional Opportunity Traditional software and hardware upgrades Cloud and Big Data architecture Traditional architecture Mainframe Unix server Storage Network Innovative application development Office and desktop cloud Enterprise OA Mobile office Contact center Paa. S Management plane General hardware Now R&D, test, and disaster recovery R&D and testing Data plane (Big Data) Iaa. S Basic virtualization software Future Peripheral production and innovative applications Data analysis, content management, e. Banking, mobile banking, and payment… Evolution Core production cloud Credit card, core banking, financial management

Success Case in Bank A: Financial Private Cloud Fusion. Sphere + Ocean. Stor DJ (SDS Controller) + AC (SDN Controller): Building converged pools to host heterogeneous computing, network, and storage resources Intelligent O&M platform: Fast application deployment and elastic scaling based on service catalogs 30 days 50 steps 30 mins 1 step 200+ databases deployed Fast application deployment 10 peripheral services are migrated to the cloud 80% Self-service coverage HQs and 72 T 1 branch data centers

Success Case in Bank B: Agilely Launching Intermediation Services Using the Cloud Platform’s Microservice Architecture Iaa. S and Paa. S technology on the Open. Stack architecture Long R&D period 1 to 2 weeks Repetitive coding 50%+ code reduction Agile development 97 city branches Cannot cope with traffic surges Second-level Elastic deployment 22 FEP systems Slow upgrade and deployment 4 hours One-click O&M, Iterative rollout 1, 000+ services

Core Banking Application Cloud Transformation: Using Kun. Lun to Build High-Reliability, Cost-effective Core Banking System Application Database Credit card Payment and settlement Credit loan e. Banking DB 2 HANA OS Kun. Lun OS High-reliability cloud platform for unified core banking service management Kun. Lun World’s first 32 -socket Unix server with an open architecture High performance No service interruption Faster innovation 8 to 32 sockets RAS 2. 0 Open ecosystem Vertical scale up and down Highest-level reliability Replacing traditional Unix server

From RISC to x 86: OLTP Performance Improved by 40% and TCO Reduced by 50% Kun. Lun 9016 VS. RISC Server 16 S RISC 16 S Unix server with a closed architecture 120 100 Latency TPS 25%↓ 40%↑ Kun. Lun 9016 Unix server with an open architecture Transaction success rate 100% TCO comparison in all phases 100 80 50 60 40 50 40 20 30 24 9 12 0 Hardware investment 初期硬件 Software investment 初期�件 IBM Power 780 (16 S) I Vendor Power 780 (16 S) 5 -year O&M 5年�保 Huawei Kun. Lun 9016 (16 S) OAM 管理运� Source: Internal Project Data

Not Just Cost Reduction: Cloud Transformation Brings Five Benefits to IT Architectures Financial Service Trend Traditional IT Architecture Financial Cloud 1. Product rollout period Year month week Time-consuming IT environment preparation: 50+ steps, at least 1 month Self-service, ready in 1 week 2. Daily transaction 1 M 100 M Low resource usage down to 30% Improving resource usage to 80%+ 3. O&M efficiency Series, manual automatic, self-service For manual maintenance and upgrade, each technician can maintain fewer than 50 physical devices With automatic O&M tool management, each technician manages more than 200 physical devices. 4. Cost per transaction High low 5. System continuity 8/5 (selecting channels) ubiquitous (consistent experiences) l l CNY 10 per account CNY 0. 1 per transaction Quarterly version updating, service interruption upon major changes l l CNY 1 per account CNY 0. 01 per transaction Zero service interruptions

RESHAPING DATA: FINANCIAL BIG DATA

Financial Services Industry Data Requirements Risk control Building a real-time anti-fraud platform to improve risk control and fraud prevention abilities Marketing support Using Big Data analysis (real-time stream processing) to optimize marketing models and improve production efficiency Customer acquisition Establishing Big Data clusters to analyze customer needs, consumption trends, and target customer groups Data assets Mining historical transaction and operational data to extract more value Service innovation Leveraging Big Data to address market competition, predict requirements, categorize markets, and analyze sensitivity Matching business strategies and leading service innovation

Huawei Financial Big Data: 6 Application Scenarios Help Banks Build the Second Data Plane Tools and Apps (ISV) Real-time antifraud Log analysis Query traffic shifting Centralized image storage Historical data archiving Second data plane (Big Data platform) MPPDB Offline/Near-line computing First data plane (traditional data warehouse) Big Data hardware (infrastructure) New data warehouse Memory computing Core banking Credit loan Payment Big Data storage Ocean. Stor Real-time stream processing Product support Card Anti-fraud x 86 server Card approval Settlement Convergent infrastructure Fusion. Cube Concurrent database Service mgmt. Asset and debt Finance mgmt. Cloud platform Fusion. Sphere Numerous Apps: Open data platform Hybrid load: Batch, interactive, mining, real-time stream, etc. Reshaping data Module installation: Brick -style component assembly using plug-ins Future-oriented: Distributed, linear expansion

Huawei Helps G Bank Build the Next-Generation Converged Data Warehouse and Replace Teradata with Fusion. Insight Libr. A Data integration and batch processing platform Data exchange platform Source system Enterprise data integration Historical data zone Upper-layer App (BI, supervision, etc. ) Data market Batch dispatch system Basic data sharing zone Temporary data zone Fusion. Insight Libr. A Data market (hybrid load) Fusion. Insight MPP Analysis platform Basic data zone Fusion. Insight Libr. A Convergence zone Data market Batch dispatch system Unstructured data zone Fusion. Insight HD l … Analyst platform SAS Goldengate Storm Flume l Open architecture l Lower costs l Enhanced, real-time data processing ability l Data exchange platform: Longer data storage … Fusion. Insight HD l Credit Stream processing platform CDC l Perfor mance Replacing Teradata with Libr. A Real-time applications duration MPPDB supports 6 data warehouses and markets: CBRC supervision data collection, enterprise data integration, credit and loan service query platform, performance management, etc. Cluster scale: 100 computing nodes, 4 management nodes, 4 loaders, 40+4 small clusters, and 60+4 large clusters Data scale (by October 2016): 110 TB for small clusters, 120 TB for large clusters, 0. 5 TB daily increment, 4, 000 tables (large table contains more than 50 billion lines), etc.

Huawei Helps Joint-Stock Bank C Mine Data and Explore Internet Financial Services Real-time query of historical transaction data Real-time credit query New service innovation Data storage duration extended from 13 months to 7 years Credit card query accelerated from 2 weeks to real time Customer prediction accuracy (small loan) improved by 40 x Offline historical data query Credit query: 2 to 3 weeks Account data Traditional data plane Credit query: 2 to 5 seconds Online historical data query Contingent assets Financial Precision relationship recommendation Account, transaction, customer service, and social interaction Big Data plane: Fusion. Insight …

Big Data Real-time Anti-fraud: From Post-event Tracking to Live Event Control Online payment Transaction channels Core system Online transfer Branch Card consumption e. Banking Withdraw Self-service POS Credit loan Safe transaction Credit card Payment and settlement Traditional anti-fraud systems Feedback Outgoing call confirmation Anti-fraud system External data Rule management Data collection Multi-dimensional Case report management Workflow management Suspicious transaction System integration Transaction termination Case transferring Real-time anti -fraud system Data query Big Data risk control platform Stream processing system Flume, Kafka Real-time fraud detection Farmer RTD Fusionlnsight Offline analysis Hbase, Spark Traditional anti-fraud Real-time anti-fraud

Retail customer assessment Business risk control Internal management Risk control Efficient business operations ü Optimized management Real-time risk prevention process ü Better operational efficiency Product operational KPI Customer risk assessment Brand reputation Blacklist User position Knowledge map Employee retention Info security analysis O&M log analysis Customer risk report Anti-fraud Real-time credit query Real-time risk control Product performance evaluation Knowledge mgmt. Website analysis ü Lower management costs Accounting tracing Intelligent customer services Small loans Secure and reliable channel risk control Customer contribution Opportunity mining Corporate customer categorization Personalized wealth mgmt. Customer retention Customer acquisition Overall solution and tailored services Cross sales Professional marketing and sales Public opinion analysis Customer profile Flexible and refined customer categorization Customer label Data Product operations Marketing support Event marketing Scenarios Services More Scenarios to Explore User consumption trend Third-party credit Internal service data Internal non-service data New data Third-party data Account, financial, component, and module logs O&M logs and internal service system data Mobile Apps, We. Chat, contact center, and Weibo Internet, telecom, healthcare, transportation, and consultation

RESHAPING SERVICES: OMNI-CHANNEL BANKING 1. MOBILE BANKING 2. MULTIMEDIA BANKING

Banks Are Planning to Make Financial Inclusion a New Strategy Annual revenue banks could get by reaching out to the un/underbanked in emerging markets alone. $380 billion Source: “Billion Reasons to Bank Inclusively, ” by Accenture Banking Countries with national financial inclusion strategies Reduce poor people’s financial costs 29 million subscribers 50+ Increase poor people’s financial capability Generate economy efficiencies Banks providing financial services with mobile money Countries … 160, 000+ agents … 80% market share

Huawei Mobile Banking Solution Builds New Internet Banks Providing financial services with the help of mobile telecommunications l Mobile Money l l Mobile Banking Mobile Payment l l Mobile Finance l l l Deposit Withdraw P 2 P transfer International remittance QR payment Online payment Direct debit Loan Insurance Investment Financial advice BI/AML/Life services

Serving Unbanked Customers with Huawei Mobile Money Flexible agent network to boost financial inclusion availability Agent Customers Merchants Bank Card network Distributors 1 Agent 1 Customers Distributors 2 Agent 2 … Agent 3 Traditional bank for fund custody Mobile Money Platform Clearing house … MNO … Traditional bank A Traditional bank B Traditional bank C Traditional bank …

Huawei Mobile Money Business Overview Enables banks to provide innovative, asset-light, reliable mobile financial services for unbanked and underbanked customers Cash In at Agent P 2 P Transfer Cash In from Bank Fund Cash In at ATM Registered to Unregistered Money Transfer Unregistered to Unregistered Openness Cash Out at Agent Cash out to Bank Account Cash Out at ATM Buy Goods Pay on POS (ATM Card) Salary Distribution Welfare Distribution Cash Out IR Merchant Payment Utility Bill Payment Bulk Payment e. Top up International Remittance (receive and send) Flexibility Pay Utility Bill Pay Post Paid Bill Top up by Customer Top up at Agent Availability Security

Centering on Customer Experience and Offering Fast Response to Market Needs Up to 2, 000 TPS Response Time < 100 milliseconds (Zero Data Loss) Reliable Open 99. 99% reliability Dual-node backup 100+ open API: Fast, cost-effective ecosystem convergence 99. 99% HA, RPO = 0, meeting regulatory requirements Geographical DR AML High concurrency 2, 000 TPS Distributed applications Cloud infrastructures Low latency Latency < 100 ms Transportation Report Retail IMT Hub AG (ESB) e. Commerce Infrastructure Phone charge Mobile access Open API Interface compatibility Real-time monitoring Operation support Secure Bank Payment alliance Agile Financial security certification International standard certification National laws and regulatory compliance Elastic data models enable flexible configuration, reduce customization workloads, and support fast GTM Elastic data models enable account, menu, commodity, and interface configuration Mobile wallet Mobile payment Mobile finance

Success Case: b. Kash of Bangladesh b. Kash, a subsidiary of BRAC Bank, has become the No. 1 mobile financial services provider in Bangladesh, accounting for 80% market share 29 M registered subscribers 11 M active subscribers l l Challenges facing b. Kash l l Huawei solution l l l 160, 000+ agents 2016 revenue: 170 M Market share 80% National financial security Rigid system and high OPEX Obsolete platform can’t satisfy diverse needs Inefficient service support Local deployment to meet regulatory needs Flexible platform, 80% requirement can be realized by configuration Offer diverse services in short TTM Tremendous supporting resources, delivery within 5 months Roadmap Alignment with b. Kash Huawei’s platform is very well designed. It not only can handle the scale but also can handle specific needs that we may have for different customers… — Kamal Quadir, b. Kash CEO

Smart Branch: Self-service + Assistance, Dedicated Expert Services, Fast Deployment + Remote O&M Remote expert services Mobile marketing Meeting room merce e. Com e zone ienc exper 1 -to-1 financial consulting services Equipment room e l se lfe S ne zo 24 -hour service zone ervices ic rv dded s l Issuing bank cards Selling wealth management product IC card payment services … l Value-a l l All-in-One financial appliance l l Expert resource usage Exhibition Applying for credit cards Applying for small loans Managing wealth M Self-service zone l l VT Door, closed during non -business hours ATM + voice and video interaction + remote assistance, efficiently dispatching remote tellers for service support l Customer satisfaction Travel costs Deployment efficiency All-in-one deployment: Network + voice + Wi-Fi + video surveillance + UPS Remote O&M: Network, energy, and infrastructure management

Multimedia Banking Offers Ubiquitous Service Experiences to Financial Customers Customer Challenges l l l New branches: Unstable traffic and costly customer acquisition Mature business areas: Inappropriate branch deployment Popular branches: Long waiting queues Private line celing accounts, Issuing card, opening/can g, managing signing contracts, investin tion, and queuing wealth, remote collabora Self-service Customer Benefits Remote counter l l l Wireless Issuing card, opening/canceling accounts, signing contracts, and promoting products Mobile marketing Efficient, cost-effective customer acquisition from multiple channels Branch deployment optimization cuts down channel investment costs. e. Channels shift 80%+ counterservices. Internet Wealth management at h ome Remote expert s ervices

Multimedia Banking Supports Flexible Distribution of 80%+ Counter Services in Diverse Channels Query Modify info Transaction Consulting Loss report Card Small loan Signing contracts Bank book Wealth mgmt. Opening account Medium Branch Transaction Wealth mgmt. Consulting Loss report Card Small loan Sign contracts Bankbook Opening account Wealth mgmt. Media Community banking Info changes Media Mobile banking Transaction Loss report Small loan Consulting Modify info Transaction Consulting Sign contracts Wealth mgmt. Transaction Query Home banking Retail banking Modify info Tablet banking Query Modify info Query Branch Modify info Query Tablet banking Corporate banking

HSBC Expands Its Services with High Efficiency and Cost. Effectiveness Using Huawei Solutions Customer Challenges l The Hong Kong Monetary Authority requires HSBC to set branches in remote areas to provide financial services. These branches have high costs and low revenues. l During its business expansion in China, HSBC needs an executable solution to efficiently and costeffectively deploy branches. Huawei Solution l Huawei deployed VTC agents in Shanghai and VTM machines in Guangzhou (12 sets in the phase-1 project). l The mobile VTM offers vehicle-mounted financial services in Hong Kong. Customer Benefits l Efficient, cost-effective branches deployment, saving USD $1. 15 million in OPEX over 5 years. l Credit card activation rate raised from 50% to 90% l 24/7 services for comprehensive service quality improvement

ICBC’s Intelligent All-In-One Cabinet Customer Challenges l Difficult management and inefficient O&M: ICBC needs unified branch management and automatic O&M l High land leasing fees: ICBC wants all-in-one hardware solutions to reduce equipment room footprints and cut down land leasing costs. l No on-site O&M personnel: Remote, unmanned O&M has become a must. Huawei Solution l Fusion. Module 500 integrates the mainframe, network cables, UPS, power distribution, and monitoring modules. l All products are easy to configure and deploy, dramatically accelerating solution delivery. l The independent monitoring system intelligently monitors the environment and device status. Users can conduct remote O&M using SMS messages and mobile phone Apps. Customer Benefits Fast deployment and intelligent O&M — Intelligent all-in-one cabinet in ICBC Tongxiang branch l The system uses standard interfaces, allowing unified monitoring on the HQ. l Equipment rooms support unmanned operations, lowering TCO by 30%. l The all-in-one design reduces the hardware footprint by 50%.

Contents 01 Financial Services Transformation in the Internet Era 02 Digital Banking: Reshaping IT to Fuel Digital Transformation 03 Building an Ecosystem to Drive IT Architecture Transformation

Centering on Customers and Working with Partners to Build an Open Financial Ecosystem Omni-channel Service Data … Precision risk control Precision marketing Data warehouse platform Production cloud RDT cloud Core banking service migration (RISC to x 86) Intermediation … … Desktop cloud Platform Computing Storage Network …

Focus on Serving FSI Customers and Building Digital Platform, Data, and Service Abilities 300+ global financial institutions Typical cases 6 of the world’s top 10 banks 10+ customers in strategic cooperation Reshaping platform Reshaping data Reshaping services ICBC financial cloud ABC open platform Shanghai-Hong Kong stock connection (10, 000 TPS) CMB: Real-time credit query system PBOC: Suspicious transaction analysis platform China CITIC Bank (International): Unified data warehouse HSBC: Remote video banking system CMBC: Mobile financial services platform Bank of Shanghai: 24 -hour remote teller services …

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