Digital Banking Excellence Lloyds Banking Group « Digital Market Insights » STARTMay 2012
OBJECTIVES OF THIS DOCUMENT 1 HIGHLIGHT EMERGING DIGITAL BANKING TRENDS IN RETAIL AND COMMERCIAL BANKING IDENTIFY LEADING DIGITAL BUSINESS PRACTICES 2?
Exec Summary Digital Trends Conclusions Contacts Appendix?
Customer Expectation vs Business Value in 2013 for a mature bank 2 Simplicity 1 M-Wallet Legend Dashboard 1. High investment 3 Security 1 4 E-commerce &Savings High 2. Medium Investment Customer Mobile as primary 11 Tech Innovation 10 6 empowerment contact 1. Low investment CUSTOMER’S EXPECTATION’S Knowledgeable 18Bank everywhere 5 Contextual Cloud about me 9 2. Reuse Better service: environment 28 17 Media Center 3. Quick-Win apps – open APIExec Summary 15 Digital 5 Social Media 4 M-Payments capabilities benchmarking Medium Redefine branches Micro-management 14 1 Capgemini Consulting models journey Analysis – Mai 2012 7 Tablets 6 Geolocation Knowledgeable self Each number refer to 14 10 Gamification service kiosks - ATM hypothesis of the document 2 Single view of the 12Digital platform Key Trends customer 13Speed to deliver LowConclusions Contacts Less Medium High Appendix EXPECTED BUSINESS VALUE
Summary Customer Insights New Services Competitors New Models New Technology Payments Commercial Enablers Digitization has increased customer expectations and the availability of new services DIGITAL NEW DIGITAL THE CUSTOMER CAPABILITIES SERVICES, FROM CONSUMER DIGITAL IS NOW AT THE THE BULK OF ARE BEING MOBILE, SOCIA WITHIN AND PAYMENTS WILL CREATES NEW CENTRE OF THE INNOVATION IS DEPLOYED TO L MEDIA, AND OUTSIDE BE A KEY REVENUE BANKING HUB, COMING FROM DELIVER STP ANALYTICS ARE BANKING HAVE BATTLEGROUND OPPORTUNITIES ENABLED BY EMERGING AT SPEED AND GAME INCREASED FOR CUSTOMER IN COMMERCIAL DIGITAL COMPETITORS SEAMLESS CHANGERS CUSTOMER INSIGHT AND BANKING CAPABILITIES CHANNEL EXPECTATIONS LOYALTY INTEGRATION Delivering this Customers The traditional Banks need to The next wave of Banks will need to At a basic customer have very high structure of understand the financial services create the means level, building on Key Trends centricity expectations banks tends to changing nature innovation will be to ensure they the key requires banks driven by their inhibit the pace of the channels enabled by support mobile functionality to radically day to day of innovation and the technologies that payments, either provided for retail revaluate how digital implications of can deliver richer through direct customers, such they structure experiences. If emerging digital experiences at focus or as single sign and arrange banks cannot capabilities on lower cost partnership on, PFM, etc, addr themselves deliver they their cost base esses a key need will go elsewhereExec Summary TO LEAD OR BE A FAST FOLLOWER, BANKS REQUIRE WORLD CLASS INNOVATION AND DELIVERY CAPABILITIES Legacy systems and structures will hinder this, but banks need to create the ability to innovate and deliver and digital speeds in their focus areas (e.g. service, payments, etc)Conclusions Contacts DIGITAL WILL DRIVE THE CHANGE AGENDA FOR BANKS Appendix (WHETHER THEY LIKE IT OR NOT)
Summary Customer Insights New Services Competitors New Models New Technology Payments Commercial Enablers THE CUSTOMER IS NOW AT THE CENTRE OF THE BANKING HUB, ENABLED BY DIGITAL CAPABILITIES KEY TRENDS - HYPOTHESIS IMPLICATIONS PROOF POINTS • Customers will dictate how they want to About 26% of US online adults use a I want to manage my money, interact with their money financial advisor. Just 29% of Europeans 1 my way • Visibility across all financial holdings, believed their bank puts them first - regardless of provider, will be valued Banks to take note as Customer Advocacy impacts revenue- Forrester 57% of customers required a better service Key Trends across channels. Mobile is today the best channel to increase customer satisfaction (Apple, Tesco) – WRBR12 – Capgemini I want a simple, seamless and • Provide simplicity: single sign-on for all More than 50% of iPhone users have 2 personalized experience device/site, simple search, consistent ID&V • Develop single view of your customer used mobile banking in past 30 days and across all interactions 33% of mobile banking users monitor accounts daily, 80% weekly (Javelin Strategy) 69% of consumer in Europe are worriedExec Summary I want flexible, secure access • Ensure security of transactions especially about privacy and 66% believe their is an 3 to my money at any time Mobile, Tablets and Online • Investigate morphing solutions for avatars risk to increase fraud. However 87% of UK consumer see m-payment as more convenient, speed and easier - MashableConclusions Pace of change is accelerating, with consistently increasing customer expectations Contacts Appendix
Summary Customer Insights New Services Competitors New Models New Technology Payments Commercial Enablers NEW SERVICES, FROM WITHIN AND OUTSIDE BANKING HAVE INCREASED CUSTOMER EXPECTATIONS KEY TRENDS - HYPOTHESIS IMPLICATIONS PROOF POINTS • Examine and rebalance your channel strategy. Yankee Group (June 2011) predicts that Electronic payments and m- there will be 500 million m-banking users Note that branches still have a role to play globally by 2015. 4 commerce will become the • Address the digital business as a revenue M-commerce is estimated at 31 b$ by 2015 in primary payment channel generator, and how that will impact the US – eMarketer business Social media is a key customer 89% of people have yet to buy anything on • Integrate social media into your innovation and Key Trends interaction and insight prototyping processes Facebook – Havas Media 5 channel, and will gain in • Use social media and analytics to generate By 2012, 40% of financial services firms importance in financial predicators of trends, needs and issues expect to invest 5% in average of their services marketing budget in Social media - Forrester • The mobile will be the primary relationship One out of three American consumers to use hub, around which interactions will be co- their mobile phone to access their bank Mobile will be the primary account, credit card, or other financial account ordinated for the majority of customers 6 interaction channel by 2014 • Geolocation is an opportunity by 2013 – Federal reserve survey • Relationship manager will be an app building Barclays: online banking customers make 6 transactions a week, mobile banking on technologies such as Siri customers make 10. #mse11 - TwitterExec Summary There were more tablets purchased than • Tablets are replacing PC’s at home PC’s in 2011. However only 20% of Tablets are becoming theConclusions 7 home-life management tool • They are expected to be integrated with the client environment leveraging opportunities websites are optimized for tablets Today it’s mainly focus on advertising 22%, with cannibalizing practices – REC+ Contacts Customers are expecting to manage their own money across all holdings, through their increased experience and acceptance of supported self service Appendix
Summary Customer Insights New Services Competitors New Models New Technology Payments Commercial Enablers THE BULK OF INNOVATION IS COMING FROM EMERGING COMPETITORS KEY TRENDS - HYPOTHESIS IMPLICATIONS PROOF POINTS End to end model bank in the future will represent Emerging competitors are more • New technologies and entrants will be faster 5.5% versus 22.8% today. 14.1% will be and more nimble distribution driven, 11,4% product driven and 8 fleet of foot, due to their lack • There is an opportunity to partner with or buy 14.6% utilities. 44.7% have not the capabilities to of old infrastructure new offerings with small organisations transform. Other are mix – Capgemini Analysis WRBR12 Apple is becoming bigger than Google and Key Trends • Create a unified platform to manage the client Microsoft combined in 2012 Apple, Google and Facebook Facebook make their introduction with high data based on internal/external actions 9 control information access and • Creation of a datamart/analytic team on growth perspectives by 2015 management business side 10% of people would consider Apple as a bank. 43% of Apple’s customers - Websources New competitors are Evolving from traditional/online banking; m- focusing on customer • They can afford to be fast and nimble 10 experience, however do not • However, they do not have the level of trust that the main players have banking will attract 115 million users in Europe and 86 million users in North America, by have the same trust 2015.- Berg Insight:Exec Summary 8 out of the 15 major banks in the world signed Banks are creating • There is a consistent trend for leaders to a partnership BBVA with Google, Citi with IBMConclusions 11 partnerships with new partner with a tech firm in digital (city, bbva) or Watson, Google and visa, BNP Paribas with Orange to leapfrog competitors – Capgemini entrants such as Google operators. Not doing all in-house. Analysis Contacts Universal banks need to examine partnership opportunities should be explored with innovative players Appendix Source: Capgemini Consulting-MIT Analysis – Digital Transformation: A romap for billion-dollar organizations (c) 2011 (1)Bank 2.0, Brett King (2) London-based consulting firm, KAE (3) Capgemini World Retail banking report 2012 Simple Bank website
Summary Customer Insights New Services Competitors New Models New Technology Payments Commercial Enablers DIGITAL CAPABILITIES ARE BEING DEPLOYED TO DELIVER STP AT SPEED AND SEAMLESS CHANNEL INTEGRATION KEY TRENDS - HYPOTHESIS IMPLICATIONS PROOF POINTS More than 40% of firms as build an optimize digital Digital platforms will provide • The digital platform must support platform in 2010. vs 29% in 2007. Firms with an 12 the integration platform across SOA, enabling modular growth and where overarching vision of digital have a financial performance 20% above their industries average channels required contraction – MIT CISR 2011 In the Capgemini Consulting MIT Key Trends Speed of innovation and • Due to the resources required, you will not be survey, companies are rating the pace of able to lead in all areas. Determine the focus 13 delivery needs to reflect other • Create a lean, optimised innovation and change at 5.6 out of 7, with the same acceleration 5 years later. They rated their digital businesses – fast! delivery engine innovation capabilities at 4.7 out of 7, Current time to implement an idea from crowdsourcing innovation is 9 month on average - American banker Branch transformation is • Customers prefer online for routine activities It’s estimated that branch networks account for • Design your new-intermediation strategy about 60% to 75% of banks retail banking cost 14 required to maintain • Take lessons learn from retail (apple) base. Apple stores are the most valuable retail their value to the business • Develop different type of point of sales chain in the U.S. Capgemini AnalysisExec Summary Digital capabilities will • Digital will enable a utility approach by More than 60% of banks believe that newConclusions 15 accelerate changes in the supporting virtual supply chains (e.g. capabilities will be crucial to success in banking operating model aggregators, etc) mobile, however they are not yet investing accordingly – EMEA/McKinsey Contacts The digital channel has the potential to become a higher revenue channel than branches Appendix
Summary Customer Insights New Services Competitors New Models New Technology Payments Commercial Enablers MOBILE, SOCIAL MEDIA, AND ANALYTICS ARE GAME CHANGERS KEY TRENDS - HYPOTHESIS IMPLICATIONS PROOF POINTS One out of three American consumers to use their Mobile is set to be the • Development of leading mobile banking mobile phone to access their bank account, credit card, or other financial account by 2013 – Federal 16 primary interaction and solutions, with a focus on ease of use and reserve survey payment channel putting control to the customer Barclays: online banking customers make 6 • Development of flexible payment solutions transactions a week, mobile banking customers make 10. #mse11 - Twitter Key Trends Social media, including In 2012, more than 70% of banking transactions • Provide better service to customers Skype, will be the preferred 17 channel for customer (responsiveness, proximity, customization) • Expedite / optimize claims processing will be done at the self-service channels-Novantas 57% of customers required a better service across service • Reduce customer service costs channels – Capgemini – WRBR12 Companies can lower the cost of their customer Cloud solutions will enable • Examine the use of cloud solutions to service infrastructure by up to 43% over a five- accelerate innovation and prototyping 18 rapid prototyping and go to • Review pricing structures and cost to year period by choosing cloud-based customer market deliver, as new players will have less care tools rather than on-premise options. Frost & Sullivan’sExec Summary overheard • Incentivise customers to use your payment In 2009, the McKinsey Global Institute estimated Owning the customer solutions, or the data will be available to that U.S. banks and capital markets firmsConclusions 19 transaction data is key others collectively had more than 1 exabyte--or one quintillion bytes--of stored data. It’s a core • Provide meaningful, personalised location strategic asset and digital enabler. 22% of based marketing based on the data financial organizations are in partnerships on a Geolocation projects in 2012 Contacts These solutions put the customer in control of their money, anytime anywhere, while also providing two way communications support with their financial providers Appendix Source: Capgemini Consulting-MIT Analysis – Digital Transformation: A roadmap for billion-dollar organizations (c) 2011 Capgemini-Consulting benchamark across 137 companies cross-industries (c) 2011
Summary Customer Insights New Services Competitors New Models New Technology Payments Commercial Enablers DIGITAL CONSUMER PAYMENTS WILL BE A KEY BATTLEGROUND FOR CUSTOMER INSIGHT AND LOYALTY KEY TRENDS - HYPOTHESIS IMPLICATIONS PROOF POINTS Mobile payments set to reach £591 billion by • Competitive mobile / digital payment offerings 2015 – KPMG Digital payments will become are required to support the customer The data also shows that 21 percent of 20 a primary day to day payment • relationship retailers already view m-payment capability method Examine potential partnerships with new as important enough to be their ‘main activity innovative players or, at least, a key enabler’. Key Trends Customers need to be • Vouchers and location based marketing are Only 29% of the customer welcome the day required that mosts payments are done by mobile 21 incentivised to use digital • Provide loyalty rewards for digital phone. Mashable payments payments, particularly mobile • Banks are trusted with finance, more so than 69% of consumer in Europe are worried Security needs to be assured the new entrants about privacy and 66% believe their is an 22 – and banks are in prime • Educate customers as to the security of mobile risk to increase fraud. However 87% of UK position for this payments, specifically with the rise of mobile consumer see m-payment as more wallets convenient, speed and easier - MashableExec Summary End to end model bank in the future will represent 5.5% versus 22.8% today. 14.1% There is no clear end model – • Define modular solutions that can be used 23 but you can’t wait now, and can be aligned to the eventual model will be distribution driven, 11,4% product driven and 14.6% utilities. 44.7% have notConclusions the capabilities to transform. Other are mix – Capgemini Analysis WRBR12 Contacts New entrants are specifically targeting the capture and ownership of customer data, while existing players such as Apple and Amazon have untapped potential Appendix
Summary Customer Insights New Services Competitors New Models New Technology Payments Commercial Enablers DIGITAL CREATES NEW REVENUE OPPORTUNITIES IN COMMERCIAL BANKING KEY TRENDS - HYPOTHESIS IMPLICATIONS PROOF POINTS Commercial customers are • Focus on addressing identified customer 57% of commercial customers would be needs willing to pay increased fees for a better web 24 willing to pay for digital • Create appropriate pricing models portal. IBM Survey 2011 capabilities 49 % of businesses are willing to pay for the convenience of mobile cash management Basic SME services are similar • Build on existing capabilities where possible capabilities, pointing toward the ability for Key Trends 25 to those of the retail • Create a single sign on for customers banks to generate fee-based revenues to customer cover some of the cost associated with this kind of technology investment –Aite/Funtech 2011 55 percent of treasurers expressed interest in performing more advanced functions such as Mobile banking will be key • Create SME mobile banking capabilities approving transactions and initiating 26 for SMEs • Link the services with analytics and insight (dashboards etc) payments via a mobile device. The number of m-payments transactions totaled 4.6 billion in 2010, and is expected to grow 48.8% per year throughExec Summary 2013 to 15.3 billion$. Enabling SME’s to manage Square payments is expecting to reach their own money on a day • Provision of analytical solutions for SME’s 5b$, including analytics dashboard forConclusions 27 to day basis, with the RM • Changing role of the RM to an increased ‘support’ and advisory role for the SME merchants - Techccrunch Currently 55% of RM are focusing on a single providing advice product sale and 45% are not aligned with the banking strategy – CCI April 2012 Contacts As the digital services provided in retail grow exponentially, so too will the expectations from commercial banking Appendix
Summary Customer Insights New Services Competitors New Models New Technology Payments Commercial Enablers TO LEAD OR BE A FAST FOLLOWER, BANKS REQUIRE WORLD CLASS INNOVATION AND DELIVERY CAPABILITIES KEY TRENDS - HYPOTHESIS IMPLICATIONS PROOF POINTS • Speed of innovation is difficult for the main 8 out of the 15 major banks in the world Banks are partnering with banks due to legacy solutions and structures. signed a partnership BBVA with Google, Citi New approaches are required 28 innovation leaders to • There is a consistent trend for leaders to with IBM Watson, Google and visa, BNP accelerate their own capabilities partner with a tech firm in digital (city, bbva) or Paribas with Orange to leapfrog competitors – Capgemini Analysis Key Trends operators End to end model bank in the future will represent 5.5% versus 22.8% today. 14.1% will Banks are focusing on being • Focus on products and services that deliver be distribution driven, 11,4% product driven and your strategy 29 leaders in key areas – and • Being a fast follower requires leading 14.6% utilities. 44.7% have not the capabilities to transform. Other are mix – Capgemini fast followers in others innovation and delivery capabilities Analysis WRBR12Exec Summary • Internal governance and software development Only 17% of the traditional large organizationsConclusions Digital delivery timescales are solutions do not lend themselves to digital are succeeding in their digital transformation being sought (e.g. fast!), but delivery journey – Capgemini Consulting- MIT Survey 30 are being hampered by existing • An integrated governance structure, across all structures products, channels and services is requried Contacts Appendix
CONCLUSIONS Task force focus4 Innovation & Task force focus 1 2 Simplicity 1 M-Wallet Capabilities Mobile, Online & Expected 1 Dashboard 4 E-commerce Tablets 3 Security &Savings High Impacts: Expected impacts: Leapfrog Customer Mobile as primary Increase customer 11 Tech Innovation 10 6 empowerment contact CUSTOMER’S EXPECTATION’S competitors with experience Knowledgeable partnerships 18Bank everywhere 5 Contextual Retention and Cloud about me 9 Understanding Better service: environment reward on 28 17 Media Center the changing apps – open API customer loyaltyConclusions nature of 5 Social Media 4 M-Payments Compete on M- channels benchmarking payments market Understand cost Medium Redefine branches 14 6 Geolocation base models 1 Micro-management 7 Tablets journey Task force focus 2 3 Customer Exp & Knowledgeable self 10 Gamification Task Force focus 14 service kiosks - ATM Analytics Social Media capabilities Expected Single view of the Expected impacts: 2 12Digital platformExec Summary Impacts customer Delivering customer Move 13Speed to deliver centricity transaction from Drive top line sales Low Key Trends physical to digital growth by predictive network to offer reduce costs Delivering Switch call personalized Contacts centres to media High experience Less Medium centres Apprendix EXPECTED BUSINESS VALUE