Future Digital Trends in Banking 2011

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A 2011 report on digital banking trends originally presented to the CMO of Ally Bank.

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Future Digital Trends in Banking 2011

  1. 1. Future Trends in BankingMAY 2011
  2. 2. The History of Banking SMS banking is introduced in the late 2000s and mobile banking takes off in 2010 with the advent of both the Internet or “online banking” iPhone and Android becomes a popular The 21st Century saw the enhanced feature offered by influx of various services many banks to its being introduced by banks customers around 2005 including insurance, pensions and money market The 1990s saw the rise ofIn 1973 the electronic funds the “Universal Bank”payment system wascreated. As a result, In 1960 the first ATM wastelephone banking was inventedintroduced In 1959 the first check sorting machines were invented based on a In the 19th Century the rise universal agreement of of trade and industry in the check design U.S. led to the creation of merchant banks by In the 12th Century, powerbrokers such as J.P. merchant banks were Morgan invented and included the In 2BC, Babylon recorded creation of checks loans between monks and merchants
  3. 3. Primary Objectives in BankingAttracting New Customers Keeping Existing Customers Increasing Revenue Per Customer
  4. 4. Bank Marketing in 2011: Broadcast, OOH, Online, Email, Mobile, TabletAmount of dollars spent on advertising by banks in 2010:• Citibank = $1.6 billion• Bank of America = $1.9 billion*On average most banks are spending 2% of revenue on advertising• Percentage of this spent on digital = 15%• Percentage Bank of America plans to spend in digital in2011 = 30% (double the amount of 2010)
  5. 5. Bank Marketing in 2011: Social CommunitiesSeveral banks arenow moving into theterritory of socialcommunities toconnect withcustomers.However, many areusing caution andnot offeringpromotions. Mostare using theplatforms to launchunique applicationslike a “virtual bank”from ASB in NewZealand or anadvisory board thatdoles out grants forcharities fromChase in New York
  6. 6. Banking in 2011Currently bank customers can use the following four outlets to carry out banking activities: 1. Branch Locations 2. ATMs 3. Online 4. Mobile 5. Social Communities
  7. 7. Future Banking Trends: Handset Users by 2020 Mobile Financial Services or “MFS” currently accounts for:• 150 million users globally in 2010• Projected to be 400 million users globally by 2013• Estimates are predicting over 2 billion users globally by 2020• 1233% growth in less than 10 years time
  8. 8. Future Banking Trends: Emerging Technology Already we are seeing bank customers using new technologies to make their lives more convenient:• Chase offers a mobile app with check scanning for deposits and person-to-person “quickpay”• Less emphasis on “paper statements” and more emphasis on digital-only or “green” electronic technologies• The ability to reach customer service via phone, email or SMS 24 hours a day is shifting to social communities, e.g., Bank of America is using Twitter for dedicated CRM
  9. 9. Future Banking Trends: Mobile Payments and Tracking
  10. 10. Future Banking Trends: Mobile Payments and Tracking
  11. 11. Future Banking Trends: Mobile Payments and Tracking http://www.youtube.com/watch?v=Lb_Ae4lwxaA
  12. 12. Future Banking Trends: P2P Payments Bitcoin is a digital currency created in 2009.• It is used by programmers, developers and small business persons as a form of “digital cash”• Payments can be made P2P with http://www.youtube.com/watch?v=Um63OQz3bjo no need for central authorities or issuers• Transactions are based on public-key cryptography keeping users identities anonymous
  13. 13. Future Banking Trends: Global Money Transfers New services allow for money transfers without the use of a bank• Xoom.com and RevolutionMoneyExchange allow users to register and wire money worldwide by linking their U.S. bank account to payment to foreign companies• Fees are lower than regular bank wire transfer fees• Xoom was cited by the Wall Street Journal in 2011 as one of the “50 most promising companies”
  14. 14. Future Banking Trends: P2P Lending Lending money predates financial institutions but in its modern form it is a byproduct of Web 2.0 technologies• Zopa.com was the first lending company founded in the UK• Prosper.com was the first lending company founded in the US• Both networks leverage existing social network communities to connect potential lenders to borrowers• The network acts as a “connector” and is not a “lender”• Usually offer better rates than can be offered by traditional banks (less than 10%)
  15. 15. Future Banking Trends: Investments and Savings Move money from a bank checking or savings account to a hyper-yield interest rate online bank to save for goals and large ticket items• Smartypig.com• Chipin.com• The premise goes against the credit card mentality of “purchase now, pay later” and reverts back to layaway planning where the customer “saves now, buys when ready”• Involves a social amplification element to the savings process• Virtual piggybanks• Requires an existing funding source
  16. 16. Future Banking Trends: Money Management
  17. 17. Future Banking Trends: The end of cash?- “The End of Cash” by James Gleick, Published in The New York Times Magazine, 1996
  18. 18. Future Banking Trends: The end of cash?• The question is not if, it is only of when• Cash has no real value in itself• With digital payment methods, you can always have the right amount on hand• Forgery is rampant with cash• Mobile money is a viable alternative - every phone is a payment terminal and every phone has the ability to be a payment processing device• Virtual money is being used to trade for real goods in games such as ‘World of Warcraft,’ and on communities such as ‘Second Life’ and ‘Habbo Hotel.’• Cash attracts criminals. Rid of cash, help decrease the crime rate around certain activities• In 2010, the Swedish Parliament became the first official entity to commence discussions about the timing of the ending of cash• The feeling is it’s wasteful (printing, shipping and destroying) and a health hazard (bacteria)
  19. 19. Future Banking Trends: Alternatives to paper currency aka Digital CashDigital Cash is a system that allows aperson to pay for goods or services bytransmitting a number from onecomputer to another. Like the serialnumbers on real dollar bills, thedigital cash numbers are unique. Eachone is issued by a bank thatrepresents a specified sum of realmoney. One of the key features ofdigital cash is that, like real cash, it isanonymous and reusable. That is,when a digital cash amount is sentfrom a buyer to a vendor, there is noway to obtain information about thebuyer. This is one key differencebetween credit cards and digital cash
  20. 20. Future Banking Trends: Complementary CurrencyCC’s are usually issued to addressspecific issues or problems. They areuseful for adjusting the public’sspending behavior. The most notablecomplementary currency in usage isthe Toronto dollar. This currency canbe exchanged 1-to-1 from Canadiandollars and be spent at specificmerchants in downtown Toronto.Merchants who accept the dollars arefree to exchange Toronto dollars forCanadian dollars twice a month at therate of 90 cents. The other 10 cents isput into a reserve fund for localcommunity organizations to tap into
  21. 21. Future Banking Trends: Digital Gold CurrencyDGC is a form of currency based onounces of gold. Proponents claim itoffers a truly global and borderlessworld currency system, free fromexchange rates and politicalmanipulation. Proponents say thevalue is protected as it is backed bythe gold standard and not atinflationary risk like fiat currencies
  22. 22. Future Banking Trends: Virtual CurrencyVirtual currencies exist within avariety of social network gamesincluding World of Warcraft, Farmville,Cyworld, Second Life and Hub Culture.People are spending real money forvirtual goods and services that helpthem express their online personality http://www.youtube.com/watch?v=l6HjMlCvZoY
  23. 23. Future Banking Trends: Predictions1. Bank tellers will be accessible 24/7 through social communities 2. NFC technology will be on all mobile devices 3. The Mobile Phone is the New Wallet 4. Digital Cash will replace physical based on convenience 5. Virtual Currency will be used for payment on real goods and services
  24. 24. Thank You
  25. 25. Contact:Geoffrey S. Colon - Digital StrategistTwitter: @djgeoffegeoffreyscolon@gmail.com+1.917.617.1194http://www.linkedin.com/in/geoffreycolon

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