Privacy Managing the Balance of Value

1. Privacy Managing the Balance of Value CACR Privacy & Security Workshop Peter Cullen Royal Bank of Canada Nov.10th, 2000

2. Objectives • Why Privacy is Important - Legislation or Not • The RBFG imperative • The Customer Centric View • How Royal Bank Approaches • Customer Management • Data management • Information management • Customer choice management • Alignment Management • Information Management - • Roles and Challenges

3. Objectives • The Necessities • The Success Factors • The Customer • The Challenge

4. So What’s The Big Deal?

5. Reputational Risk - or Privacy Firestorms “DoubleClick erodes 70% of Market Value” “US Bancorp fined $3 Million For Selling Data On Customers” “State Attorneys Investigate 6 Banks for Possible Violation of Privacy Laws” “There is mounting evidence of an increase in banking practices that are at least seamy, if not downright unfair and deceptive” John Hawke Jr., OCC

6. So What’s At Stake?

7. Environmental Assumptions • Robust information use is a prerequisite for success in a service economy. • Consumer trust is a necessity for maintaining success in a service economy.

8. Value Balance Of Interests TrustFlexible In formation Use Law Self Governance Broad Use/Secondary Use Industry Codes Data Warehouses Self Restraint Database Marketing Value Passive Data Collection Public Reaction Economic Deflator Escaping Economic Activity Courtesy Of Experian

9. Our Goal: To establish a consistent, coordinated, client centric approach for information management and use across RBFG Built on Client preferences & choice

10. The Necessities…. Privacy has two fundamental components: • Custody of information • Use of information • The Basics • Consent/Disclosure • Choice • Control • Respect

11. The Success Factors…. Alignment of • Business Management • Information Management • Data Management • Alliances Management • Out Sourcing Management • Human Resource Management

12. Key Challenge - Alignment Customer Value Balance Consent / Use Opt -Out Web Training Alliances Commun. Security Monitoring Etc. BUSINESS MANAGEMENT CUSTOMER INFORMATION MANAGEMENT HUMAN RESOURCE MANAGEMENT RISK MANAGEMENT

13. Customer Information Management Customer Relationship Data Management Client Preference Legal & Ethical Boundaries & Choice

14. “The Customer Information Management Cycle” • Sales Performance • Cross-sales • Customer Relationship • Expansion • Marketing • Effectiveness • Critical Success • Factors • Customer views as value added Identifying Critical Data • Customer • Prospect • Competitive • Just the right data • Data Sources • “How to” • Capture data • Who captures the data • Client preference/privacy Measuring Results of Data Use Capturing Data • Optimizing • Marketing • Programs • Linkage to sales • Putting data into action • Driving sales • Performance • Simplicity • The right data • To the right people • At the right time • Easy to use • Keeping data current and relevant Using Data for Marketing and Sales Delivering & Presenting Critical Data

15. How We Manage Privacy • RBFG Privacy Code • Customer Consent/Disclosure • Privacy Management Committee • Employees - Conduct and Code • Data Stewardship • Training • Communication/Awareness • Alliances • Assessment

16. Protecting Privacy A Customer Centric View • Fosters a relationship built on trust • Enables deeper insights into clients needs: • Enhances customer confidence • Develops customer loyalty by more effectively meeting client needs across multiple points of contact • Provides a competitive edge

17. What Are Consumers Saying? • Loss of control over personal information - 80% • Primary Concerns - • Inappropriate Use of information • Security of financial transaction • But…It is an anticipatory concern • Key reason sited for Non On-line buying • Net-Users - more concerned • Privacy Concerns to Privacy Activism • refusal, false information, Opt-out • The reality - On-Line Sales • Only .2% of Total Operating Income - Canada • Only .6% of Total Sales - US

18. What Does Life Look Like After CRM? Client Preference & Choice

19. Anticipating Client Needs Actionable Models Client Level risk Product Level risk External risk Appended external data Share of wallet Other... Actionable Analytics Lifestage Segmentation Client potential LTV, NPV Predictive modelsby Product Client attrition Channel preference Other... Individual current client level Profitability

20. Service Delivery Environment Strategic and Tactical Analytical tools Client Feedback --- --- --- Client Decision Engine Direct Marketing Campaign Management MIF/ EDW Face to Face ABM/Commercial Kiosk Marketing Offers Credit Granting Retention Management Royal Direct Marketing Opportunities AccountDecisioning Recoveries PC/Internet Banking The Business Architecture Client Strategies CLIENT DECISION STRATEGY TEAM Actions / Tactics Client Profiles

21. Today’s Bank Experience Multiple Touch Points BUSINESS ROYAL RBC ACTION RBC DS PFS DIRECT BANKING TRUST INSURANCE Branch Telephone PC Banking Cellular Banking Phone Call Centre Telephone RBFG’s “touch” issue with it’s customers: • Customer information is maintained on different systems with no consistent customer identifier. • Difficult to design product / service offerings with only a piece of customer profile. • Bank seen to be communicating “at” customers not “with” them. • Customer can simply click and move today - we must find another way to keep our customers.

22. Client Preference & Choice Call Centre ACTION BUSINESS ROYAL RBC Cellular PFS RBC DS INSURANCE Assistant (PDA) DIRECT BANKING TRUST Phone Personal Digital Telephone Banking • create a mutually beneficial relationship - provide the customer with their enterprise-wide information while giving the Bank an enterprise-wide view of the customer • customize to the client’s individual needs • empower the client to define their relationship with us; • customer chooses contact, relationship and business aggregation preferences • customer chooses which marketing information to receive • Bank can provide alerts to customer re mortgage, investments or other opportunities Client Preference & Choice can:

23. Enterprise Customer Information Management Enterprise Client Registry Customer Billing C Models Privacy Shield Customer Views Royal Action Royal RBC Bank Direct Trust Insurance Customer / Service Information Profitability

24. Each Architectural Decision is Related to a Customer Decision • How does customer information from separate legal entities get aggregated? • Within the law? • Within customer consent? • What changes will be required to disclosure and consent? • What are the customer’s opt-out choices? • Sharing of information? • Modeling? • Operational decisioning? • How do you operationalize the customers choice? • Where do Privacy filters get implemented? • Before aggregation? • Before operational decisions?

25. Technology Due Diligence Framework Business Model Application Architecture Data Management & Architecture Technology Infrastructure Architecture Meets the current & future strategies Business Processes & Requirements Usability/ Navigation Consistency Privacy & Security Information security Due Diligence Open standards Backup & Recovery Scaleability Robustness

26. “Here’s a prediction you can take to the bank: Within a decade, privacy management will be one of America’s great growth industries.” The 500 Year Delta: What Happens After What Comes Next Jim Taylor and Watts Wacker

27. A new deal will be struck between consumers and businesses regarding the use of personal information, giving more control over its reuse to customers. While government mandates may enforce some portion of this new relationship, businesses that do not embrace consumer control before the government steps in will be relegated to a low-trust, commodity position in the market.” • Institute for the Future's (IFTF) 10-Year Forecast

28. Conclusion Privacy Is A Business Issue