HSBC Take IT to the Bank

Take IT to the bankTake IT to the bankHSBC Holdings plcHSBC Holdings plcKen Harvey, Chief Information OfficerKen Harvey, Chief Information Officer

28 September 200628 September 2006

ForwardForward--looking statementslooking statements

This presentation and subsequent discussion may contain certain This presentation and subsequent discussion may contain certain forwardforward--looking statements with respect to the financial condition, resulooking statements with respect to the financial condition, results of operations lts of operations and business of the Group. These forwardand business of the Group. These forward--looking statements represent the looking statements represent the GroupGroup’’s expectations or beliefs concerning future events and involve ks expectations or beliefs concerning future events and involve known nown and unknown risks and uncertainty that could cause actual resultand unknown risks and uncertainty that could cause actual results, s, performance or events to differ materially from those expressed performance or events to differ materially from those expressed or implied in or implied in such statements. Additional detailed information concerning imposuch statements. Additional detailed information concerning important factors rtant factors that could cause actual results to differ materially is availablthat could cause actual results to differ materially is available in our Annual e in our Annual Report.Report.

Take IT to the bankTake IT to the bankHSBC Holdings plcHSBC Holdings plcKen Harvey, Chief Information OfficerKen Harvey, Chief Information Officer

28 September 200628 September 2006

HSBC global technologyHSBC global technology

Ken Harvey, Group Chief Information OfficerKen Harvey, Group Chief Information Officer

AgendaAgenda

•• IntroductionIntroduction–– (Douglas Flint, Group Finance Director, HSBC Holdings plc)(Douglas Flint, Group Finance Director, HSBC Holdings plc)

•• HSBC Global TechnologyHSBC Global Technology–– (Ken Harvey, Group Chief Information Officer, HSBC Holdings plc)(Ken Harvey, Group Chief Information Officer, HSBC Holdings plc)

•• The world of The world of ‘‘ee’’–– (Tracy (Tracy RediesRedies, Chief Executive Officer, HSBC.com), Chief Executive Officer, HSBC.com)

•• Branches and SelfBranches and Self--ServiceService–– (Rumi Contractor, Chief Information Officer, Europe)(Rumi Contractor, Chief Information Officer, Europe)

•• HSBC Global Technology HSBC Global Technology -- rounduproundup–– (Ken Harvey, Group Chief Information Officer, HSBC Holdings plc)(Ken Harvey, Group Chief Information Officer, HSBC Holdings plc)

•• Q & AQ & A

Global Platforms Global Platforms –– credit cardscredit cards

The HSBC Group global networkThe HSBC Group global network

Group Data Centres Group VSAT Satellite Hubs Group Service Centres

Syracuse

From Hong Kong

From Manila

Los Angeles

From Hong Kong

Cook Islands

Auckland

WellingtonChristchurch

Vancouver

Edmonton

Calgary Winnipeg

San Francisco

Mexico City

PanamaColón

CaymanIslands

MiamiBermuda

Santiago

Nassau

Buenos Aires

Montevideo

Sao Paulo

Curitiba

Chicago

New Jersey

TorontoBoston

New YorkBuffalo

SheffieldLiverpool

DublinLondon

Jersey

Madrid

Paris

Amsterdam

Stockholm

MoscowWarsaw

DusseldorfLuxembourg

Belgium

Geneva

Monte CarloBarcelona

ValenciaAthens

Milan BudapestBratislava

Prague

Tel AvivCairo

Alexandra Cairo

YerevanIstanbulThessalanild

Beirut Baghdad

RiyadhJeddah

Abha

AmmanRamallah

Kuwait

Cape Town

Johannesburg

Salalah

Port Louis

MaléColombo

Almaty

AmmanRamallah

Dubai

Chandigarh

New DelhiDamman

MuscatMumbaiPune

Ahmedabad

ChengduChongqing

Dhaka

TrivandrumBangalore

Kuala Lumpur

Hyderabad

Visak

KolkotaGuangzhou

Manila

Shanghai

ChittagongHanoi

Macau

Wuhan

Beijing

Tianjin

DalianPusanBurma

Tokyo

Xiamen

Osaka

TaipeiKaohsiung

ChenoiBangkok

Penang

Singapore

BandungJakarta

Batam

SurabayaSemarang

KuchingBrunei

IpohHo Chi Minh Cebu

Kota Kinabalu

Hong Kong

To New York

To Chicago

To Cook Islands

Guam

Brisbane

PerthAucklandAdelaide

MelbourneSydney

WellingtonChristchurch

Shenzhen

Quebec

Montreal

Paying dividends on three years of investmentPaying dividends on three years of investment

•• One global network, self managedOne global network, self managed

•• 80 global 80 global ‘‘groupgroup’’ platformsplatforms

•• Four global data centre pairs, two regionalFour global data centre pairs, two regional

•• 42% of development in low cost centres42% of development in low cost centres

•• Reducing unit rates of production 10% per annumReducing unit rates of production 10% per annum

•• Implemented consumption based chargingImplemented consumption based charging

0

20

40

60

80

100

120

140

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Number of Data Centres worldwideNumber of Data Centres worldwide

Shift spend to global innovation and serviceShift spend to global innovation and service

8%4%

34%52%

2%

2005 Actual (US$4,413m)2005 Actual (US$4,413m)

11%

5%

33%

50%

1%

2006 Plan (US$4,810m)2006 Plan (US$4,810m)

12%

7%

32%

48%

1%

2007 Plan (US$4,990m)2007 Plan (US$4,990m)

Group Systems - Gold Group Systems Regional Implementation

Regional Development IT Operations

Other

10%

12%

14%

16%

18%

20%

22%

45% 50% 55% 60% 65% 70% 75% 80%Cost/Income ratio

IT c

ost/O

pera

ting

cost

Optimal investment in ITOptimal investment in IT

Overspending

Unexploited efficiency potential

Enabling increased efficiency

Efficient IT Median

Stra

ight

Thr

ough

Pro

cess

ing

(STP

)

Desired rangeDesired rangeHSBC 2005

HSBC 1H06

IT Efficient IT Efficient -- Competitor Comparison (2005)Competitor Comparison (2005)

Credit card migrations cost savingsCredit card migrations cost savings(Estimated annualised cost savings)(Estimated annualised cost savings)

Mexico Mexico –– October 2004, October 2004, 2.3m accounts2.3m accounts

Annualised savingsAnnualised savings$14.1m$14.1m


US US –– October 2004, October 2004, 1.3m accounts1.3m accounts



UK UK –– February 2005, February 2005, 7.7m accounts7.7m accounts



Canada Canada –– June 2005, June 2005, 0.3m accounts0.3m accounts



Australia Australia –– June 2006, June 2006, 0.2m accounts0.2m accounts



Annualised IT cost Annualised IT cost savings: $43.4msavings: $43.4m


New market launch New market launch either completed or in either completed or in

progressprogress


In progress migrationsIn progress migrations

Leverage points over two yearsLeverage points over two years

•• Global credit card platform (17 applications) taken from HSBC FiGlobal credit card platform (17 applications) taken from HSBC Finance nance CorporationCorporation

•• HSBC Global NetworkHSBC Global Network

•• All new hosting done in UKAll new hosting done in UK

•• 70% of development done in India70% of development done in India

•• 100% Internet Protocol based100% Internet Protocol based

•• MultiMulti--language interface developedlanguage interface developed

26 countries; US$43.4 million in annual cost reduction; 26 countries; US$43.4 million in annual cost reduction; 25% card growth at no incremental cost25% card growth at no incremental cost

The World of The World of ‘‘ee’’

Tracy Tracy RediesRedies, CEO, , CEO, HSBC.comHSBC.com

HSBC Group Direct BankingHSBC Group Direct Banking1H 2006 1H 2006 vsvs 1H 20051H 2005

InternetInternet

•• Traffic Traffic –– 840 million sessions 840 million sessions -- up 30%up 30%

•• Product sales Product sales –– up 65% up 65%

•• Total revenue Total revenue –– up 70%up 70%

TelephoneTelephone

•• Calls Calls –– up 9% up 9%

•• Product sales Product sales –– up 8% up 8%

•• Total revenue Total revenue –– up 3%up 3%

•• Total direct revenues up 29% led by internet which now contributTotal direct revenues up 29% led by internet which now contributes >50% of direct es >50% of direct revenuesrevenues

•• >70% of HSBC transactions now going through direct channels>70% of HSBC transactions now going through direct channels

HSBC.comHSBC.com –– OrganisationOrganisation and strategic focusand strategic focus

•• A single global centre of excellence in eA single global centre of excellence in e--Commerce IT with coCommerce IT with co--located located business and IT professionalsbusiness and IT professionals

•• Developing and implementing global internet banking and multiDeveloping and implementing global internet banking and multi--channel channel sales and service solutions for all customer segmentssales and service solutions for all customer segments

•• Based in New Jersey and Chicago with functional reporting units Based in New Jersey and Chicago with functional reporting units in Canada, in Canada, HK and London HK and London

•• Development resources distributed primarily between Canada and IDevelopment resources distributed primarily between Canada and India (740 ndia (740 staff)staff)

How do we leverage HSBCHow do we leverage HSBC’’s unique global IT s unique global IT capabilities?capabilities?•• ‘‘Build once, deploy manyBuild once, deploy many’’

–– HSBCnetHSBCnet: one system : one system -- 60 countries 60 countries -- accounts in 115 countriesaccounts in 115 countries–– 2G: one internet framework, platform infrastructure and suite of2G: one internet framework, platform infrastructure and suite of sales capabilities sales capabilities --

nine countries so farnine countries so far–– Suite of security solutions for CIBM, CMB, PFSSuite of security solutions for CIBM, CMB, PFS

•• Follow the sun approach to system developmentFollow the sun approach to system development–– > 50% of development in low cost areas > 50% of development in low cost areas -- analysis and design close to businessanalysis and design close to business

•• Economies of scale Economies of scale –– Global vendor agreements Global vendor agreements -- cost savingscost savings

•• Rapid leverage of knowledge and learning globally through internRapid leverage of knowledge and learning globally through internal business al business and IT consultingand IT consulting

HSBCHSBCnetnet: a global channel for CIBM/CMB customers: a global channel for CIBM/CMB customers

•• Provides secure, realProvides secure, real--time access time access to a suite of reporting, transaction, to a suite of reporting, transaction, research and analytics services. research and analytics services.

•• Business areas covered include:Business areas covered include:–– Global marketsGlobal markets–– Global cash managementGlobal cash management–– Investment bankingInvestment banking–– Trade servicesTrade services–– SecuritiesSecurities

•• 89% of users regularly use 89% of users regularly use

•• Available in nine languagesAvailable in nine languages

•• Payments in 1H06 exceeded all of Payments in 1H06 exceeded all of 20052005

74%

25%

1%

CMB CIB Others

Volume by market segment

HSBCHSBCnetnet

•• Single signSingle sign--on provides simplified on provides simplified accessaccess–– Access to >100 applications available Access to >100 applications available

through a single usernamethrough a single username

•• Personalisation allows intuitive access Personalisation allows intuitive access and ability for customers to build a and ability for customers to build a strong, uniquely personal experience strong, uniquely personal experience with HSBCwith HSBC–– Users can mix and match the BankUsers can mix and match the Bank’’s s

applications to which they are entitled, into applications to which they are entitled, into combinations that best suit their online combinations that best suit their online usage habits or business rolesusage habits or business roles

HSBCHSBCnetnet: security as part of the brand: security as part of the brand

•• Sophisticated tools to maintain optimal Sophisticated tools to maintain optimal protection, confidentiality and transaction protection, confidentiality and transaction management integrity management integrity

•• Internet access Internet access –– including payments including payments –– is is protected from day one, using twoprotected from day one, using two--level level authentication, oneauthentication, one--timetime--passwordpassword--generating generating security devices, and smart cardssecurity devices, and smart cards

•• Fraud Fraud –– among the lowest of all major banks among the lowest of all major banks in fraud occurrence and lossesin fraud occurrence and losses

2G innovative business solutions for PFS, Consumer 2G innovative business solutions for PFS, Consumer Finance and CMBFinance and CMB

•• RealReal--time sales campaign capabilities with time sales campaign capabilities with ‘‘useruser’’ related images related images

•• ‘‘ChampionChampion--challengerchallenger’’ allows business to test campaigns, react to customer allows business to test campaigns, react to customer preferences and change content every few hourspreferences and change content every few hours

•• Business development environment and MI toolsBusiness development environment and MI tools

•• Common global IT infrastructure platform out of three global datCommon global IT infrastructure platform out of three global data centres a centres

•• Rollout to reach >80% of websites traffic in next 18 monthsRollout to reach >80% of websites traffic in next 18 months

2G 2G -- Changing how we manage online businessChanging how we manage online business……Changing a campaign: How fast?Changing a campaign: How fast?

08:45 08:45 –– 09:0009:00

09:00 09:00 –– 09:3009:30

09:30 09:30 –– 09:4509:45

09:45 09:45 –– 10:1510:15

09:45 09:45 –– 10:1510:15

10:15 10:15 –– 10:3010:30

10:30 10:30 –– 11:0011:00

The EThe E--Sales ManagerSales ManagerUses 2G MI tools to see how campaigns are doingUses 2G MI tools to see how campaigns are doing

The Web editorial meetingThe Web editorial meetingGets buyGets buy--in to make changesin to make changes

The EThe E--Sales ManagerSales ManagerChanges planner, briefs creative / delivery teamsChanges planner, briefs creative / delivery teams

The Creative teamThe Creative teamWrite copy, design bannersWrite copy, design banners

The EThe E--delivery teamdelivery teamCreate campaign XML file, test in Business Development EnvironmeCreate campaign XML file, test in Business Development Environmentnt

The EThe E--Compliance teamCompliance teamSign off new bannerSign off new banner

The EThe E--delivery teamdelivery teamDeploy to live!Deploy to live!

2G in action2G in action…… Sales Campaign Manager (SCM)Sales Campaign Manager (SCM)

A last minute campaign opportunity . . . A last minute campaign opportunity . . .

eBusinesseBusiness quickly created new ads for a Smart Package Campaign using SCM quickly created new ads for a Smart Package Campaign using SCM to test them on the to test them on the us.hsbc.comus.hsbc.com home pagehome page

Guess: Which advert had the best click through rate on the homepGuess: Which advert had the best click through rate on the homepage?age?

A

C

B

D

Did you guess?Did you guess?

We didnWe didn’’t . . . we measured!t . . . we measured!

2G 2G SCMSCM’’ss champion and challenger in actionchampion and challenger in action

Smart parkSmart park

TanningTanning

Door whiteDoor white

Smart doorSmart door The Winner!

1.75%

2.30%

1.71%

1.88%

35% 35% more more salessales

Optimising content daily, sometimes hourly when it makes senseOptimising content daily, sometimes hourly when it makes sense

Image nameImage nameClick-thrus

PrePre--programme campaign changes by date/hoursprogramme campaign changes by date/hours

Currency takeover: 21Currency takeover: 21--28 July28 July Premier takeover: 21Premier takeover: 21--28 August28 August

What does 2G give our customers?What does 2G give our customers?

•• We can recognise and talk to different people in different ways We can recognise and talk to different people in different ways online, online, providingproviding–– relevance relevance –– through intelligent targeted content:through intelligent targeted content:

–– Save me time: show me what ISave me time: show me what I’’m looking form looking for–– Engage with meEngage with me

–– personalisation through personalised content and prepersonalisation through personalised content and pre--filled applicationsfilled applications–– Save me time: less repetition Save me time: less repetition –– Give me a reason to come backGive me a reason to come back

Intelligent content based on what we know about the Intelligent content based on what we know about the customercustomer

Mrs Patel,

Mr Fung,

Ms Hamilton,

Results: customer upgrades to Premier Jersey Results: customer upgrades to Premier Jersey ––up 86%up 86%

0

2

46

8

10

12

1416

18

20

Pre P2G Phase Post P2G Phase 2

Avg

. wee

kly

lead

/sal

es

Premier leads createdPremier sales completed

Existing customers requesting upgrade to Premier via website

Currency takeover on homepage Currency takeover on homepage All homepage banners automatically replaced for 1 week with currAll homepage banners automatically replaced for 1 week with currency themeency theme

401 clicks401 clicksNo 2No 2





1,601 total clicks1,601 total clicks21% increase on 21% increase on

previous previous weekweek

What are our customers saying about new sites?What are our customers saying about new sites?

May 06 Survey May 06 Survey -- Jersey:Jersey:

•• 96% said navigation via tabs in the secure site is 96% said navigation via tabs in the secure site is ‘‘usefuluseful’’ or or ‘‘very usefulvery useful’’

•• 87% said pre87% said pre--filled applications are filled applications are ‘‘usefuluseful’’ or or ‘‘very usefulvery useful’’

•• 83% said personalized offers / banners are 83% said personalized offers / banners are ‘‘usefuluseful’’ or or ‘‘very usefulvery useful’’

“It is stunning! Well done and thank you for the intuitive, easy-browsing experience.”

“Managing my accounts seems far quicker and easier than before.”

"It makes it easier for me by recognising that I'm an existing customer.”

“I expect forms to be filled out for me, so this makes real sense. It’s great.”

Guy Hamilton, CEO HSBC Bank International Guy Hamilton, CEO HSBC Bank International –– P2G endorsementP2G endorsement

What is the business impact of 2G?What is the business impact of 2G?

•• Business impact Business impact –– USUS–– Internet sales up over 25% since implementation of 2G Website inInternet sales up over 25% since implementation of 2G Website in November 2005November 2005–– Over 250,000 Online Savings accounts opened raising US$ 5.7 billOver 250,000 Online Savings accounts opened raising US$ 5.7 billion raised (83% ion raised (83%

new money)new money)

•• Business impact Business impact -- JerseyJersey–– Post launch uplift:Post launch uplift:

–– Leads = 27%Leads = 27%–– Sales = 26%Sales = 26%

–– 54% in upgrade leads for Premier accounts; 86% increase in accou54% in upgrade leads for Premier accounts; 86% increase in accountsnts–– 24% increase in online saver accounts24% increase in online saver accounts–– 95% increase in secondary account sales95% increase in secondary account sales

Branches and Self ServiceBranches and Self Service

Rumi Contractor, CIO EuropeRumi Contractor, CIO Europe

Global delivery Global delivery –– branch and self servicebranch and self service

Commercial focusCommercial focus

•• Global systems making great progressGlobal systems making great progress–– 89% of cards on WHIRL (Credit Card)89% of cards on WHIRL (Credit Card)–– 35% of customers on Central Data Utility35% of customers on Central Data Utility–– 7.5% of large 7.5% of large corporatescorporates/mid/mid--market companies on HSBC.netmarket companies on HSBC.net–– 15,000 companies using HSBC.net versus target market of 200,00015,000 companies using HSBC.net versus target market of 200,000–– 6% of registered Internet Banking customers on 2G global interne6% of registered Internet Banking customers on 2G global internett–– 44% of public website user sessions on 2G44% of public website user sessions on 2G–– 87% of countries on HSBC Universal Banking (HUB) 87% of countries on HSBC Universal Banking (HUB) -- R2 core bankingR2 core banking–– 80 group systems on release schedule with annual reduction in un80 group systems on release schedule with annual reduction in unit cost (circa 10%)it cost (circa 10%)

HSBC Global Technology HSBC Global Technology -- rounduproundup

Ken Harvey, Group Chief Information Officer

Financial ResultsFinancial Results

Key indicatorsKey indicators 20042004 20052005 20062006

IT Operations rates in Shared Service IT Operations rates in Shared Service -- --8.77%8.77% --11.00%11.00%Organisation regionsOrganisation regions

Developer rateDeveloper rate -- --2.00%2.00% FlatFlat

Group systems investmentGroup systems investment -- +30%+30% +44%+44%

Low cost penetration (EOY)Low cost penetration (EOY) 30%30% 38%38% 42%42%

Projects installed within 10% of planProjects installed within 10% of plan 65%65% 71%71% 87%87%


•• Higher investment in innovation allocated from improved leverageHigher investment in innovation allocated from improved leverage of:of:–– Global Development CentresGlobal Development Centres–– Global ApplicationsGlobal Applications

•• Global Applications that capitalise on our network Global Applications that capitalise on our network –– Premier BankingPremier Banking–– Commercial BankingCommercial Banking–– Capital MarketsCapital Markets–– Payments and Cash ManagementPayments and Cash Management


•• The ability to The ability to ‘‘test and learntest and learn’’ and export the winnersand export the winners

•• ReRe--use on the same platformuse on the same platform–– LanguageLanguage–– ChannelChannel–– CurrencyCurrency–– CountryCountry

•• Falling unit costs of productionFalling unit costs of production


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HSBC Take IT to the Bank

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