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Innovation in financial services

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  • 1. Innovations in finance Chris Skinner www.thefinanser.com
  • 2. What is innovation?Innovation can be: Innovation in:•Continuous •Product•Disruptive •Service •Process •Ideas •TechnologiesInnovation ≠ inventionInnovation refers to the use of a new idea ormethod, whereas invention refers to the creationof the idea or method itself. © Chris Skinner. All rights reserved.
  • 3. “If we truly aspire to be leaders in the payments and securitiesindustries, why is it that so many innovations in this businessare pioneered by non-banks?”Heidi Smith, JPMorganSIBOS 2004 © Chris Skinner. All rights reserved.
  • 4. Why we don’t innovate?• Unproven business • No need case – Barriers to entry – Risk • regulator authorisation • cost of capital and credit – Fear • IT investment – ROI • getting customers to switch – Fast Follow © Chris Skinner. All rights reserved.
  • 5. © Chris Skinner. All rights reserved.
  • 6. Q110 Forum offers tangible financial services © Chris Skinner. All rights reserved.
  • 7. Virtual Q110 closely reflects realityBranding Architecture People © Chris Skinner. All rights reserved.
  • 8. We have so many pilots,we should run an airline © Chris Skinner. All rights reserved.
  • 9. To truly innovate, you have to be committed from the top-down © Chris Skinner. All rights reserved.
  • 10. © Chris Skinner. All rights reserved.
  • 11. ING Café© Chris Skinner. All rights reserved.
  • 12. “We don’t hire bankers, because bankers comein with their DNA and they have their legacywhich won’t fit. Instead we hire dancers,musicians and artists. People who can deliver agreat and different experience.”Arkani Kuhlmann, President and CEO, ING Direct USABAI Retail Delivery 2008 © Chris Skinner. All rights reserved.
  • 13. © Chris Skinner. All rights reserved.
  • 14. © Chris Skinner. All rights reserved.
  • 15. • October 1989 - launch• May 1991 - 100,000th customer• March 1993 - 250,000th customer• December 1994 - break-even• April 1995 - 500,000th customer• 2003 – 1 million customers• 2012 – 1.16 million customers – over 89% of customer contact is electronic (85% 2010) – 950,000 of customers use Internet Banking (890,000 2010) – 420,000 use SMS message banking (first direct sends around 3.5 million text messages to customers every month) – 44% of sales are via e-channels• first direct has been in profit every year since 1995 © Chris Skinner. All rights reserved.
  • 16. Number of 90-day Active Users at the Top US Online Banking Providers (Q2-2004)Source: TowerGroup 2004 © Chris Skinner. All rights reserved.
  • 17. Online banking users Mobile banking users•4.7m, December 2002 • Mobile banking services•11m, July 2004 introduced in May 2007•23m, November 2007 • 1m, May 2008•30m, May 2011 • 6m, May 2011 © Chris Skinner. All rights reserved.
  • 18. © Chris Skinner. All rights reserved.
  • 19. Personal Financial Management (PFM)• Over 25% of online users signed up for stand-alone PFM within 6 months• Over 75% of new PFM users use PFM again within two weeks• Over 25% of new PFM users use PFM five times or more in the first month, and spend more than double the time in PFM compared to general online banking• The average time onsite is 12 minutes, with 35 pageviews per PFM session• More than half of all PFM users are still active a year after signing-up• Over 80% of users are “pleased” or “highly pleased” with PFM• 9 out of 10 users say they’d recommend PFM to others• 66% say PFM has helped them see how they can improve financially• 41% say they have improved financial behavior after starting to use PFM © Chris Skinner. All rights reserved.
  • 20. PFM• Active PFM users have increased the total number of Íslandsbanki accounts (current, savings, credit card) by 19,4% on average after using PFM for 1 year. Other groups show no or slight increase only.• Active PFM users have increased Íslandsbanki transaction volume by 4,5% on average after using PFM for 1 year. Other groups show no increase.• Affluent customers are significantly more likely to use and be pleased with PFM than other groups• There is also evidence of significantly improved retention of PFM users with 71% of users saying that Íslandsbanki‘s PFM offering increases their loyalty © Chris Skinner. All rights reserved.
  • 21. Why should we bother withdisruptive innovation???? © Chris Skinner. All rights reserved.
  • 22. 2002: Bought by eBay for $1.5 billion, with revenues at $200 million2005: Revenues reach $1 billion2008:• Purchases made outside eBay > on eBay• PayPal provides 28.2% of eBay revenue, up from 24.8% a year before.2009:Q1 revenues $645 million, up 11% YOY; Q2 $669 million, up 11% YOY;Q3 $688 million, up 15% YOY; Q4 2009: $796 million, up 28% YOYTransactions exceed $20 billion per quarter for the first timeQ4 2008: 70 million active users, an increase of 23% year-over-year.Q3 2009: 78 million, up 19% YOY2009: Mobile transactions up from $24 million in 2008 to $140 million2010: >$75 billion transactions, >$3 billion revenues, $1 billion profitQ4 2011: PayPal has more than 106 million active registered accounts and is available in 190 markets; revenues over $1.2 billion, growing 28 % YOY, and annual revenue was $4.4 billion, processing $118 billion of which $4 billion was on mobile © Chris Skinner. All rights reserved.
  • 23. • It took radio 38 years to reach 50 million listeners.• Terrestrial television took 13 years to reach 50 million users.• The internet took four years to reach 50 million people.• Facebook took two years to reach 50 million users.• The iPad reached 50 millions users in just 18 months.• 25 billionth app was downloaded from iTunes in February 2012 after just three and a half years © Chris Skinner. All rights reserved.
  • 24. © Chris Skinner. All rights reserved.
  • 25. • Every second, four people are born globally and 32 phones are sold• Of the world’s 4 billion mobile telephones, 1.08 billion are smart and 3.05 have SMS messaging• By 2014, mobile internet usage will exceed desk-based usage• 86% of mobile internet users do so whilst watching TV• 2/3rds of mobile interest users shop on their phone © Chris Skinner. All rights reserved.
  • 26. © Chris Skinner. All rights reserved.
  • 27. • Processing $11 million a day in November 2011, up from $4 million a day in July 2011• Processing $4 billion in payments volume per year March 2012, up from $2 billion in October 2011• Over 1 million merchants (8m accept credit cards in the US)• $100 million invested in 2011 by Sir Richard Branson, Kleiner Perkins, Visa and others, bringing total funding to $168m for a valuation of over $1 billion © Chris Skinner. All rights reserved.
  • 28. © Chris Skinner. All rights reserved.
  • 29. Opus Research predicts that the global number of registered voiceprints willincrease from 10 million today to over 25 million in 2015, and much of this willbe driven by the payments markets. © Chris Skinner. All rights reserved.
  • 30. © Chris Skinner. All rights reserved.
  • 31. 2011© Chris Skinner. All rights reserved.
  • 32. This is innovation © Chris Skinner. All rights reserved.
  • 33. • Address a clear need • Launch from a fresh• Find the voice of the start customer • Find the data if needed• Adopt an outside-in – innovation from legacy is approach only possible through good analytical detail to• Develop a clear vision identify how the• Ensure top-down innovation changes the commitment traditional business model• Focus upon customer • Have a strategy for experience continual• Invest in staff differentiation engagement if they are • Build the right team to to engage the customer implement © Chris Skinner. All rights reserved.
  • 34. It is better to have tried and failed,than to have failed to try.
  • 35. Barclays Bank / Barclaycard• first credit card in the UK in 1966• first loyalty scheme in 1986• first to accept online bill payments in 1997• first to introduce contactless cards in 2007• first to introduce mobile contactless in 2011• crowdsourcing customer views with Barclaycard Ring in 2012• first to introduce C2C payments with Pingit in 2012 © Chris Skinner. All rights reserved.
  • 36. Innovators do win more businessFrom: Go Getter, innovator To: Entrepreneur, CEOI’ve been thinking about our banking relationship with ABC Bank,and would like to seriously consider changing banking partner. ABC do not strike me as interested in innovations for consumersor businesses. I get the impression that of all the banks, Barclaysare the ones with the most ‘innovation’ in terms of services andapplications – they launched the PingIt app very recently, forexample, and I also know from our BACS software suppliers thatBarclays do more for small-medium sized businesses. Both ofour competitors are with Barclays – perhaps they have a desireto take on innovative businesses as part of a drive to be the mostforward-thinking. © Chris Skinner. All rights reserved.
  • 37. Innovations in finance Chris Skinner www.thefinanser.com