Global Innovation Trends in Retail Banking
Efma Webinar, October 2013
Michael Pearson, Efma Strategic Adviser
Speakers

Attendees control panel:
Patrick Desmarès
Secretary General
Efma

Michael Pearson
Senior Retail
Banking Adviser
...
Introduction
• 5th annual study of retail banking innovation
• 150+ banks from around the world participated in the resear...
Agenda
• Innovation strategy and performance
• Overcoming barriers to innovation
• Digital channel innovations
• Innovatio...
Many successful business leaders have claimed that
innovation is essential for growth and value creation

“As I’ve looked ...
Academic research also shows that companies with
growth track records rely heavily on innovation

“Growth outliers do a tr...
Most banks say they are becoming more innovative and
investing more in innovation
Innovation Level
More
Innovative

Less
I...
Banks are also now more likely to have an innovation
strategy than before
Percentage of Banks With an Innovation Strategy
...
Most banks think that their innovation performance is
improving
Percentage of Banks with Improving or Declining Innovation...
The continuing threat of disruptive innovation may be a
factor which is encouraging banks to be more innovative
Agenda
• Innovation strategy and performance
• Overcoming barriers to innovation
• Digital channel innovations
• Innovatio...
IT systems are perceived to be the most significant
innovation barrier for banks, followed by culture

Large Banks

Medium...
The problem with silo-based IT systems is mainly that
they increase time to market and the cost of innovation
Very Low
Imp...
The time to market for new offers is particularly high for
large banks
Time to Market for New Offers in Months

12
6

Smal...
There are two specific IT-related factors which could
improve innovation execution
Enterprise-wide
banking systems*
Yes

N...
There are several specific capabilities which would help
banks improve their overall innovation capability
Product

• Pers...
Open innovation is being increasingly used although
there are very mixed views on its effectiveness
Very Low
Effectiveness...
Investing in start-ups through a structured corporate
venturing approach can be of value if done well

•

$100m fund targe...
Agenda
• Innovation strategy and performance
• Overcoming barriers to innovation
• Digital channel innovations
• Innovatio...
Out of 10 digital innovations surveyed, large banks had
on average deployed the most

Source: Efma/Infosys Innovation Surv...
Out of 10 digital innovations surveyed, large banks had
on average deployed the most
Number of Digital Innovations Deploye...
Digital only banking…

Plans for Digital Only Banking
% of banks at different stages of deployment

56%
23%

21%

Currentl...
Mobile wallets…

Plans for Mobile Wallets
% of banks at different stages of deployment

56%

23%

21%
Currently
Deployed

...
Location based marketing…

Plans for Location Based Marketing
% of banks at different stages of deployment

51%
31%

18%
C...
Gamification…

Plans for Gamification
% of banks at different stages of deployment

56%
35%

9%
Currently
Deployed

Planne...
Agenda
• Innovation strategy and performance
• Overcoming barriers to innovation
• Digital channel innovations
• Innovatio...
Some of the speakers at the Efma Banking on
Innovation conference described useful case examples
FNB (South Africa)

• Lon...
Davivienda from Colombia is also an excellent
innovation case study
Conclusions…
• The innovation “good news” is that performance is improving,
investment is increasing and more banks have a...
Discussion session
Elisabet Brodin
Head of Strategy
Retail
SEB
Sweden

Rajashekara V. Maiya
Associate VP and Head
Finacle ...
Follow-up email:
- Innovation in retail banking 2013 report
- Webinar presentation
- Recording link
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Finacle Webinar – Innovation in Retail Banking 2013

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Finacle from Infosys and Efma presented the key findings of their 5th annual report — ‘Innovation in retail banking’ study, at a webinar conduced on 22nd Oct’2013. The study, based on a global survey of banks and interviews with senior bankers, investigates how banks can overcome barriers to innovation and improve their innovation capabilities, as well as banking trends

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Finacle Webinar – Innovation in Retail Banking 2013

  1. 1. Global Innovation Trends in Retail Banking Efma Webinar, October 2013 Michael Pearson, Efma Strategic Adviser
  2. 2. Speakers Attendees control panel: Patrick Desmarès Secretary General Efma Michael Pearson Senior Retail Banking Adviser Efma • Hand icon: Click on the icon if you wish to jump in the conversation. The organizer will unmute your microphone and you will be able to speak. • Chat section: Type your question and click Send to submit it to the organizer. Ask your question via the chat session
  3. 3. Introduction • 5th annual study of retail banking innovation • 150+ banks from around the world participated in the research • Focus was on how to overcome barriers to innovation • Study measured of deployment of various channel innovations
  4. 4. Agenda • Innovation strategy and performance • Overcoming barriers to innovation • Digital channel innovations • Innovation case studies
  5. 5. Many successful business leaders have claimed that innovation is essential for growth and value creation “As I’ve looked at a number of industries, virtually all the value gets created by innovation. At our company, all of our revenue growth was either organic innovation or it was through acquisition, and acquisition was a platform for future innovation.” AG Lafley, Chairman & CEO, Procter & Gamble
  6. 6. Academic research also shows that companies with growth track records rely heavily on innovation “Growth outliers do a tremendous amount of experimentation and innovation. They develop and deploy new technologies, move into new markets, explore new business models and even open up new industries. They take on acquisitions and aggressively seek input from people and organisations quite unlike their own.” Rita Gunther McGrath “How the Growth Outliers Do It”, Harvard Business Review
  7. 7. Most banks say they are becoming more innovative and investing more in innovation Innovation Level More Innovative Less Innovative +76% Investment Investing More Investing Less +70% -6% Source: Efma/Infosys Innovation Survey 2013 -5%
  8. 8. Banks are also now more likely to have an innovation strategy than before Percentage of Banks With an Innovation Strategy 37% 2009 Source: Efma/Infosys Innovation Survey 2013 50% 2011 60% 2013
  9. 9. Most banks think that their innovation performance is improving Percentage of Banks with Improving or Declining Innovation Improving Performance 17% No Change Declining Performance 7% 76% Source: Efma/Infosys Innovation Survey 2013
  10. 10. The continuing threat of disruptive innovation may be a factor which is encouraging banks to be more innovative
  11. 11. Agenda • Innovation strategy and performance • Overcoming barriers to innovation • Digital channel innovations • Innovation case studies
  12. 12. IT systems are perceived to be the most significant innovation barrier for banks, followed by culture Large Banks Medium Banks Small Banks 1 IT systems IT systems IT systems 2 Culture Culture Regulation 3 Organisation silos Organisation silos Financial 4 Regulation Regulation Culture 5 Management priorities Management priorities Management priorities 6 Financial Financial Organisation silos Source: Efma/Infosys Innovation Survey 2013
  13. 13. The problem with silo-based IT systems is mainly that they increase time to market and the cost of innovation Very Low Impact Average Impact Very High Impact Scale 1-7 Time to market 5.2 Cost of innovation 4.9 Innovation in products 4.6 Innovation in service 4.5 Innovation in process 4.4 Source: Efma/Infosys Innovation Survey 2013
  14. 14. The time to market for new offers is particularly high for large banks Time to Market for New Offers in Months 12 6 Small Banks Source: Efma/Infosys Innovation Survey 2013 8 Medium Banks Large Banks
  15. 15. There are two specific IT-related factors which could improve innovation execution Enterprise-wide banking systems* Yes No Don't Know Componentised deployment of banking systems* Yes No Don't Know * Question: Would enterprise-wide banking systems or componentised deployment improve innovation execution Source: Efma/Infosys Innovation Survey 2013
  16. 16. There are several specific capabilities which would help banks improve their overall innovation capability Product • Personalisation of product offers • Ability to launch in collaboration Channel • Unified experience across channels • Multichannel integration Customer • Customer insight • Single customer view Source: Efma/Infosys Innovation Survey 2013
  17. 17. Open innovation is being increasingly used although there are very mixed views on its effectiveness Very Low Effectiveness Average Effectiveness Very High Effectiveness Scale 1-7 Partnering with IT companies or other suppliers 4.2 Online idea generation portals 3.8 Competitions for non-staff 3.1 Investment in start-ups 3.1 Relationships with academic institutions 3.1 Source: Efma/Infosys Innovation Survey 2013
  18. 18. Investing in start-ups through a structured corporate venturing approach can be of value if done well • $100m fund targeting start-ups with the potential to transform financial services. • Based in Silicon Valley, early investments included SaveUp and Ribbit Capital. “Investing in start-up companies committed to new business models enables BBVA to learn and anticipate the emerging challenges facing the financial services sector.” Jay Reinemann, BBVA Ventures
  19. 19. Agenda • Innovation strategy and performance • Overcoming barriers to innovation • Digital channel innovations • Innovation case studies
  20. 20. Out of 10 digital innovations surveyed, large banks had on average deployed the most Source: Efma/Infosys Innovation Survey 2013 Large Banks Mobile location-based offers Voice recognition for mobile 6. Direct only banking Self-configuration of products 8. Medium Banks Mobile wallet Video conferencing 9. Small Banks Mobile NFC payments 7. 1.7/10 2. 5. 1.2/10 Mobile P2P payments 4. 2.8/10 1. 3. Number of Digital Innovations Deployed Gamification 10. Transactions via social media
  21. 21. Out of 10 digital innovations surveyed, large banks had on average deployed the most Number of Digital Innovations Deployed (out of 10) 2.8 1.2 Small Banks Source: Efma/Infosys Innovation Survey 2013 1.7 Medium Banks Large Banks
  22. 22. Digital only banking… Plans for Digital Only Banking % of banks at different stages of deployment 56% 23% 21% Currently Deployed Planned No Plans Source: Efma/Infosys Innovation Survey 2013 “Hello bank! is fully geared to the new social habits that are now transforming people’s relationships with their bank.”
  23. 23. Mobile wallets… Plans for Mobile Wallets % of banks at different stages of deployment 56% 23% 21% Currently Deployed Planned No Plans Source: Efma/Infosys Innovation Survey 2013 “CaixaBank, Santander and Telefónica to create first joint venture between banks and telecom operators in Europe to develop new digital businesses.” “Berg Insight expects that 2016– 17 will be the first years in which mobile wallets approach mass market penetration and more than 10m new wallet users will then be added annually in Europe.”
  24. 24. Location based marketing… Plans for Location Based Marketing % of banks at different stages of deployment 51% 31% 18% Currently Deployed Planned No Plans Source: Efma/Infosys Innovation Survey 2013 “Barclaycard’s bespoke offers is the savvy shoppers ‘savings SatNav’, always at your fingertips offering whatever you want, whenever you want it.”
  25. 25. Gamification… Plans for Gamification % of banks at different stages of deployment 56% 35% 9% Currently Deployed Planned No Plans Source: Efma/Infosys Innovation Survey 2013 “It is a good application to change our way of communicating with our customers, which is now more approachable and friendlier.”
  26. 26. Agenda • Innovation strategy and performance • Overcoming barriers to innovation • Digital channel innovations • Innovation case studies
  27. 27. Some of the speakers at the Efma Banking on Innovation conference described useful case examples FNB (South Africa) • Long term commitment, driven by CEO, focused on an employee competition TEB (Turkey) • Entrepreneurial culture, using multiple innovation activities and open innovation UniCredit (Italy) • How to co-ordinate across a multi-country, matrix organisation, and invest in R&D
  28. 28. Davivienda from Colombia is also an excellent innovation case study
  29. 29. Conclusions… • The innovation “good news” is that performance is improving, investment is increasing and more banks have a strategy. • The key challenges when trying to improve innovation performance are typically to do with IT systems and culture. • Some banks are able to work around their IT systems issues but ultimately simplification and working across silos is key. • Other banks have successfully addressed the innovation culture issues and are also actively using open innovation techniques.
  30. 30. Discussion session Elisabet Brodin Head of Strategy Retail SEB Sweden Rajashekara V. Maiya Associate VP and Head Finacle Product Strategy Infosys India What are the innovation investments that will achieve short term benefits and which ones are important in the long term? • Dorel Blitz Innovation Manager, Strategy & International Operations Division Bank Leumi Israel • Increasing business process speed, agility and efficiency has been rated as having the highest impact on a bank's innovation capability. What can banks do to increase their agility and efficiency to be able to innovate better? • The research has found that current legacy IT systems are one of the top three barriers to innovation. How should banks overcome this as a barrier?
  31. 31. Follow-up email: - Innovation in retail banking 2013 report - Webinar presentation - Recording link
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