Introduction

The Center for Future Banking (CFB) would like to engage with entities that share its
mission and research agenda. The Banking industry is at the core of a nations economy
and critical to its economic vitality. Banking has many long standing traditions that were
created under very different conditions than exist today. The pace of technological
advancement, the impact on society, the expansion of the global economy, the
sophistication of the financial systems, the need for local development, the management
of money, access to capital, increasing expectation of customers, shifting demographics,
and consolidation of banking, all contribute to an increasing need to development new
strategies for conducting banking. These new strategies are not obvious and no longer
can rely on slow incremental changes that are traditionally the case with Banks. Banking,
in general do not innovate, at least not in the same sense as other industries, yet the
environment under which it serves has changed substantially in capabilities and access
of the average person to information and systems that give them more control raising
their expectations of service from Banks as well as any business they use.

The banking industry is very dependent on the engagement of a chain of providers and
businesses that use banking services. It ability to innovate is wholly dependent on
engaging with the value chain of providers. It is through this engagement that new
techniques and methods may be devised using research to understand what may be
possible in the future. This probable future sets the guide for developing new products
and services and helps inform the business decisions that are made by Banks and its
providers. In general the service industry has lacked a science of service that uses
research methods to uncover those salient aspects of service to people which inform the
design of better products. Marketing research is typically used to help understand the
existing market environment but given the pace of change it is necessary to go beyond
and project into the future, what environment might emerge and the forces at work that
influence its creation. Two significant changes have occur that afford opportunities for
advancement that were not possible before, the rise of Information and Communication
Technology (ICT) in the daily lives of consumers and its central role in Banking, and the
fusing of Social Sciences with Computation, these two capabilities create the possibility
to conduct research on a scale and of the type that were previously not possible. Rapid
advances in other areas, cognitive sciences, psychology, human computer interfaces,
robotics, product design, neurobiology, health care technology, learning technology,
architecture, all promise radical changes in what people expect of the social interactions
within physical spaces and with objects.

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The Alliance with CFB would provide a means of engaging in research that benefits
consumers, the Banking Industry, and its providers by establishing a means of creating
future possibilities without the typical pressures of business cycles and competitive
issues. The Alliance may be enabling of greater competitiveness and the vehicle for
establishing the new environment under which Banks will operate. The market
environment is being created by consumers using the capabilities afforded them with the
advancement in personal ICT, namely the Internet and mobility. These new capabilities
create a market environment where services can be co-created or co-generated with the
consumers. This is radically different than the market conditions that Banks have
traditionally service and challenges notions of control, ownership of data, and service.
These challenges are shared amongst many service and product companies who find
themselves unprepared for the unsettling changes in their industries. Corporations need
to turn to academia and form an Alliance with researchers who are attempting to
understand the societal phenomenon at work and are responsible for creating some of
the capabilities that caused these changes to occur in the marketplace. Corporations
and Academia have very different missions therefore establishing an Alliance framework
that fuses the goals of Corporations and Academia into a synergistic arrangement is what
CFB is attempting. This requires active engagement in the process of research to
develop a common understanding of what will be best to accomplish our mutual interest.

Research Alliance Strategy

A Research Alliance is a trans-organizational system in which that participation is by the
respective organizations and not the individuals. This gives a formal structure to casual
individual associations where people may exchange information professionally but their
organizations are unaware of such exchanges. The Alliance is a long term purposeful
arrangement that allows each party to gain or sustain some competitive advantage and
would involve real value exchanges of money, time, knowledge, service, product or
influence. An Alliance between corporations and academia creates a formal knowledge
network that is a purpose driven group of experts working together to build each others
capacity and develop new understanding for use outside of the network. An Alliance is a
partnership, coalition or community of practice and may be inclusive of each of these
common business associations with the expressed goal of having an outlook focus on the
research that spans a time horizon that is greater than the normal product innovation
cycles. While these product innovation cycles vary by industry, in Banking they
effectively do not exist therefore a horizon range may be beyond three (3) years.

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The key driver for an Entity to participate in CFB should be to bring more capacity to its
work where the joint effort can do more than one that is separated. This would be where
mobilizing the intellectual capital of the Alliance increases the likelihood of discovery and
market innovation. The Alliance members should have complementary skills across the
institutions that would lead to better research from varying perspectives. There is a need
for critical mass of effort to have greater influence on the forces that are impacting the
market conditions under which the companies and organizations are operating.

CFB needs to extend its reach to include more points of view within its research activities
and its outlook perspectives. Banking aligned with academia is not enough. Banks do
not have a culture that is conducive to research given that it is a very highly mature and
operational business model where risk are tightly controlled and conformity is mandated.
Academia is concerned with its intellectual integrity in pursuing research that is
foundational therefore is not pragmatic in terms of what a business would except of its
results. CFB is aware of these cultural differences and are actively breaking down the
barriers to collaboration. In the pursuit of further integration, CFB recognizes that other
industries and entities view the markets differently than Banking and may have their own
experiences with academic research that would provide value to establishing a new
model for cooperation between corporations and academia. The MIT Media Lab has
been at the forefront of this collaboration but we want to evolve it further into a synergistic
process of scientific discovery and market innovation.

To forge the proper Research Alliances CFB is seeking companies and organizations that
are rethinking the business they are in, want to de-integrate and reconfigure the value
chain, leverage in-house and Alliance researchers, have a fall back position with an
outside-in view, values the role of research in informing a guided evolution of the
markets. These are companies that may not have enough research resources to apply
to the scale of the market problems, want to reduce its future risk, do not have the
knowledge of other Alliance members and want to gain some exposure to adjacent
markets, or cannot progress fast enough and is concerned with missing market
opportunities by not innovating quickly.

Three components are necessary to balance for a successful Alliance strategy, strategic
value for the parties, urgency, and resource requirements. When all three are applied to
its maximum potential it creates a strategic inflection point. The initial Sponsor for CFB,
Bank of America has the commitment to define new markets but requires Alliances with
other parties who share its sense of urgency and are willing to commit the resources to

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create the strategic value this unique opportunity can provide. Companies that share this
view are likely to become full Sponsors of CFB.

Other strategic research Alliances can be formed within CFB as well:

Long-term investments in research that will be central to the parties mutual

strategies and require joint research.
Opportunities to advance a parties strategy quickly and cheaply where ready use
of existing research is available and few resources are needed.
Expansion opportunities where creating a new market is a chance to distribute
via a new channel or deliver a new product. These may be co-branding, co-
locating, or distribution channels. A good example of this is the emergence of the
Internet and now the emergence of Social Media. These opportunities would be
handled by the respective businesses outside of CFB but may be discovered and
tested within a research project.
Research that is borne out of operational necessity to address constraints to
growth. These are systems and process that may not scale or hit a performance
maximum or have become obsolete and require radically new approaches to be
researched.
Non-strategic point solutions that are draining resources or present a risk to the
business. These are escalating problems that affect an entire industry.
Research marketplace repositioning that allows a company to move into a
market before competitors, these are usually marketing agreements but may
involve research to understand the fundamental operating principals at work in
the new marketplace.
Enabling ubiquity through licensing or open IP. This is where new markets might
be created by enabling some capability that allows it to emerge. This is generally
counter-intuitive for mature industries. An example is what Apple did to the music
industry.

To ensure that the Research Alliances are effective CFB will have a governance process
which all Alliances must conform to. In addition we will set up a rating method to help
Research Alliances improve their level of engagement. The rating will be based on the
following criteria:

Commitment

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 Strategy
Trust and Fairness
Communication
Conflict Management
Decision Making
Leadership
Performance Measurement
Roles
Skills and Competence
Team Coordination
Flexibility
Knowledge Management
Organizational Values

We will apply an annual 360 degree review process on all Alliance Entities to re-qualify
them for renewal each year.

Each Entity participating in CFB is responsible for its own product innovation cycle and is
not to attempt to conduct product research within the CFB experimental research
projects. The CFB research is the pre-cursor to product research and innovation and it
not to be confused with product development. Any entity that is found to abuse its access
to CFB research will be immediately removed from the Research Alliance. CFB
research strives to enable transformational innovation and not transitional or incremental
innovation. It is likely that while researching a transformational theme that many
transitional or incremental artifacts and techniques may be devised but these are not to
be confused with the central mission of CFB. We anticipate many residual value to come
from the research and encourage the Research Alliance Entities to make use of these
incremental advances while maintaining a focus on the transformational intentions of
CFB.

An important aspect of a successful Alliance will be the integrity and values the members
embody that invoke a sense of trust and responsibility to serving the common customers
and building a healthy market climate for expansion and sustain-ability. One of the Macro
Themes of CFB is Corporate Social Responsibility and we strive to put that at the core of
our Research Alliance Framework.

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Types of Research Alliances
The types of Alliances vary based on capabilities of the Entity joining CFB. For large
Corporations they would join the CFB as a Consortia Sponsor making the appropriate
financial contribution.

We seek a variety of Alliances with Corporations, venture backed businesses,

Universities, Research Institutes, Government Agencies, Non-Governmental
Organizations, not-for-profit entities, civil organizations, community outreach programs,
and any entity which is servicing consumers where some aspect of their financial life is
considered. The types of entities would be diverse and range from health care to
entertainment, from consumer products to law. The most obvious Alliances would be with
companies that provide services to Banks, namely technology companies but our Alliance
selection plans to balance participation across to the spectrum of entities. The intention
of CFB is to get a broad view of the market forces and avoid the current stasis that beset
the Banking industry.

We will limit the number of Alliances within a segment type and only admit entities that
demonstrate a clear understanding of the CFB mission and have some capabilities to
conduct research. To avoid conflicts only entities that are non-competitive with other
Alliance members will be accepted although it is possible the specific research on non-
competitive issues may be conducted jointly by direct competitors, this will need to be
evaluated on a case by case basis.

Qualification of Alliance Entity

The Alliances are formed with a research objective that is focused on one or more of CFB
Macro Themes and poses new questions. The Alliance is not a means of selling product
to CFB Sponsors or doing business development, or any of the typical business related
functions that occur between companies.

The Alliance entity is by invitation or nomination from one of the Sponsors of CFB. We
may accept solicitation or applications for participation. Entities are welcomed to contact
us to raise awareness of their research activities.

CFB may invite non-competing Banks to become Consortia Sponsors but will limit
participation to no more than five (5) Banks. These Banks are likely to be International
Banks doing business primarily outside of the US.

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The Alliance entity must demonstrate two or more of the following:

Academic Institutions doing research.

History of inter-institutional cooperation
Have dedicated staff conducting some form of research. This may be market
research, product research, service development, staff scientist, employees with
exemplary academic backgrounds, executives with recognized public
accomplishments.
Entities that have won awards for service or product innovations
Entities that have a consistent long term track record of performance
Entities that have recognized achievements in servicing the public.
Entities with interesting data and capability to provide it for research.
Entities with access to the public to participate in research studies.
Entities who rely on banking as a critical component of the services they sell to
the public
Entities that provide products to the Banking sector.
Demonstration of collaborative efforts with partners in creating new services and
understanding of the market.
Professional Societies that conduct conferences on topics within the CFB Macro
Themes
Civil organizations that engage the community.
Entities operating at a national or international scale.
Non-profit Entities empowering people in the emerging markets with new
capabilities to form interesting business models.

Alliance entities are required to assign a point of contact that may represent the company
in its affairs and will participate in Alliance research and events. This should be the
researcher assigned to CFB but may be an executive in the case where the participation
is other than active research. When a researcher is assigned participation in CFB
requires an annual publication of a report that is co-authored with one or more CFB
researchers and is to be presented at the annual CFB event.

Financial requirements for Alliance participation are established on a case by case basis
and are judged on the value of the capabilities of the Entities to conduct research or

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provide some necessary aspect that enables research. Large corporation would need to
be full Sponsors to participate, these are corporations with annual revenues greater than
$100 Million. Smaller corporations may contribute in-kind services either with dedicated
staff, products or services in support of a research project. Direct research grant awards
are also acceptable and depend on the needs of the specific research effort.

Alliance Entities may provide grants for specific research interest or access to data or
populations of people willing to participant as subjects in a research effort.

Benefits
The benefits of Alliance members are the following:

Secure a position as the front-runner for Innovation

Strengthen reputation and boost market presence
Speed to insight from research findings
Access to Sponsor’s Executive in Residence as a liaison to the research
activities.
Access to CFB research papers
Access to CFB website for videos of seminars and content of researchers
Preferred invitation to CFB events open to the public
Participation in an annual CFB Alliance meeting
Access to other Alliance member researchers
Access to open IP when generated as part of an enabling technology and not
part of a competitive advantage of any of the Sponsoring companies
Joint inventor or co-authoring with CFB researchers
Preferential access to graduating students with thesis work related to CFB Macro
Themes.
Funding opportunity for very short research using the University Research
Opportunity Program for undergraduates.

Governance
The Alliance Entity, when not a full Consortia Sponsor, will be hosted by one of the
Sponsors. They may participate in the CFB Advisory Board within one of the Board
Committees. The governance of the Alliance Entities is through the Bylaws of CFB.

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Participation is for one year and can be renewed after a review of performance of
participation and research contributions. Participation on an Advisory committee requires
that satisfaction of all assigned duties of the committee. Lack of participation or
performance will limit participation to one year.

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