Digital banking: Why are banks not performing as well as they could do?

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Driven by the top Internet players the speed of change in the financial services market is rapidly increasing. To secure their business and generate further growth the large-scale Internet players are forced to attack additional markets and the financial services market is one of them.
Leading Internet players will conquer the financial services market by
- utilizing their global customer base and advanced customer intelligence (data),
- by connecting today separated services to an eco system using technology
- and their ability to move fast.

Banks will have to react to the digital threads and do their homework. Some of the core actions required to achieve a better positioning in the digital channels are proposed within this slideshare.

Published in: Business

Digital banking: Why are banks not performing as well as they could do?

  1. 1. © Copyright 2014 Digital Leadership GmbHDigital Leadership Services & Consulting for Digital Leadership © Copyright 2014 Digital Leadership GmbH Why are banks not performing as well as they could do? Stefan F. Dieffenbacher
  2. 2. © Copyright 2014 Digital Leadership GmbHDigital Leadership How much time did the average bank customer spend in 2013 … In the branch In the digital channels Data source: hard data from 5 out of the top 20 banks in Europe 2013
  3. 3. © Copyright 2014 Digital Leadership GmbHDigital Leadership What % of customers were going at all to a branch in 2013? Branch visitors Digital Channels only 59.6%40.4% Data source: hard data from 5 out of the top 20 banks in Europe 2013
  4. 4. © Copyright 2014 Digital Leadership GmbHDigital Leadership Channel usage intensity and frequency by 2015 in % * Desktop / browser Banking Mobile Banking Software (i.e. Quicken) Cash / non-cash ATMs Branches *by usage frequency and usage intensity
  5. 5. © Copyright 2014 Digital Leadership GmbHDigital Leadership The Digital Channels are already today #1. The branch network is the alternative channel. Really?
  6. 6. © Copyright 2014 Digital Leadership GmbHDigital Leadership Sales (by numbers and volume) compared Branch Digital Channels Data source: hard data from 5 out of the top 20 banks in Europe 2013
  7. 7. © Copyright 2014 Digital Leadership GmbHDigital Leadership Final conclusion: banks don’t manage to make money out of their online customers.
  8. 8. © Copyright 2014 Digital Leadership GmbHDigital Leadership The User perspective
  9. 9. © Copyright 2014 Digital Leadership GmbHDigital Leadership Coralie „Youngster distant functionalist“ 2Top Prio: 5 Banking behaviour and attitude Number of banks 1 Primary bank Fortis Banking likes No personal relationship, as long as the bank does a good job doesn't need specialists currently, and prefers a distance with bank employees, likes simulations, access flexibility, general flexibility, simplicity Banking dislikes No interest in banking and the financial world in general, banking must not take up too much time, doesn't want to be confused by her bank, modern atmosphere, too much formality and administration Banking fears Little fear due to small exposure to banks Service frustrations Lack of efficiency, poor quality of advice, complicated language, marketing is to obvious, daily service is too expensive Literacy and devices Computer Literacy Good computer Literacy and frequent use of other digital devices (digital natives) but finance plays no major part in life as of now, heavy Facebook user Finance Literacy Low interest in finance and little Literacy Devices PC, iPhone 3, Android tablet Proposition Matrix Brand affinity Brand-agnostic Products u. Mngmt Savings, some current account, Mine pack, 1-2-ring Advice type Almost no use of PC banking due to limited product usage, contact via self service in branch and face-to-face, but high affinity towards digital channels, Need specialist help, concise, no proactivity, trusts friends Financial evolution Towards Nexus Retail, Nexus HiPo, risk: becoming a Retail Up and cross selling Cards, current accounts, travel insurance, PFM Key data Age: 13 Location: Charleroi Language: French Education: Primary school Salary: €0.9k Assets: €6k Segment size 160 000 Lifestyle Background: • upper middle class Life goal: • rather vague: go to university Life events: • graduation, education choice, marriage, birthdays
  10. 10. © Copyright 2014 Digital Leadership GmbHDigital Leadership Customers want to have it easy
  11. 11. © Copyright 2014 Digital Leadership GmbHDigital Leadership Customers want to have it easy -668,61 04 Apr
  12. 12. © Copyright 2014 Digital Leadership GmbHDigital Leadership And be proactively informed 13
  13. 13. © Copyright 2014 Digital Leadership GmbHDigital Leadership They expect banks to help them understand their financial life 14
  14. 14. © Copyright 2014 Digital Leadership GmbHDigital Leadership … and across their family / relevant entities 15
  15. 15. © Copyright 2014 Digital Leadership GmbHDigital Leadership Customers look at their bank to help them understand how they spend 16
  16. 16. © Copyright 2014 Digital Leadership GmbHDigital Leadership And be supported in their financial planning 17
  17. 17. © Copyright 2014 Digital Leadership GmbHDigital Leadership Creating transparency & trust 18
  18. 18. © Copyright 2014 Digital Leadership GmbHDigital Leadership Creating transparency & trust 19
  19. 19. © Copyright 2014 Digital Leadership GmbHDigital Leadership Creating transparency & trust 20 +40% conversion rate for ABN AMRO.
  20. 20. © Copyright 2014 Digital Leadership GmbHDigital Leadership Eradicate barriers for your potential customers 21
  21. 21. © Copyright 2014 Digital Leadership GmbHDigital Leadership (1) Easy sign-up (2) Photo authentication (3) Automatic login after sign-up (4) Customer does multibanking setup (! bank knows user’s monthly income) (5) Bank grants pre-approved credit The ideal customer sign-up process 22
  22. 22. © Copyright 2014 Digital Leadership GmbHDigital Leadership (4) Customer does multibanking setup (! bank knows user’s monthly income) (1) Easy sign-up (2) Photo authentication (3) Automatic login after sign-up (5) Bank grants pre-approved credit The ideal customer sign-up process 23 The customer banks within 5 minutes
  23. 23. © Copyright 2014 Digital Leadership GmbHDigital Leadership 24 The external environment
  24. 24. © Copyright 2014 Digital Leadership GmbHDigital Leadership Increasing proliferation of consumer decision making processes 25 Need to invest Online purchase Price comparison website Website visit Print campaign Youtube Channel Facebook Posts Family discussion Community review Friends recommen dation Branch visit € € € € € Video review € € € Touch points where the bank can influence (potential) customers
  25. 25. © Copyright 2014 Digital Leadership GmbHDigital Leadership Consumers directly interact with Merchants – the banks are not in the picture! 26
  26. 26. © Copyright 2014 Digital Leadership GmbHDigital Leadership MicroPayment, Pay as you go & Mobile Payment - all managed online. 27 •  Premium SMS •  Operator billing •  App billing •  In-app payments •  NFC and mobile contactless payments •  NFC trials so far •  ‘Pay by mobile’ for digital goods •  PayPal as a mobile channel •  The single-click credit card checkout •  Square and Bump: physical mobile payments •  Mobile money and banking •  Micro Web-payments •  Gaming coins
  27. 27. © Copyright 2014 Digital Leadership GmbHDigital Leadership 28
  28. 28. © Copyright 2014 Digital Leadership GmbHDigital Leadership 29
  29. 29. © Copyright 2014 Digital Leadership GmbHDigital Leadership 30
  30. 30. © Copyright 2014 Digital Leadership GmbHDigital Leadership 31
  31. 31. © Copyright 2014 Digital Leadership GmbHDigital Leadership And even sending money is being threatened. 32
  32. 32. © Copyright 2014 Digital Leadership GmbHDigital Leadership 33
  33. 33. © Copyright 2014 Digital Leadership GmbHDigital Leadership 34 The business lens.
  34. 34. © Copyright 2014 Digital Leadership GmbHDigital Leadership 3 months to launch a banner ! ROI maximized performance marketing 35
  35. 35. © Copyright 2014 Digital Leadership GmbHDigital Leadership Design goes beyond colours… 36
  36. 36. © Copyright 2014 Digital Leadership GmbHDigital Leadership Without data collection, no customer insights 37 Data from the CRM & core banking system •  Customer value •  Last branch visit •  Current residence Data from PFM •  Saving goals: user saves up for an own home •  Free finances: <€500 / month •  Rent: <€500 / month Unified Consumer Banking Data Model •  Last login, frequency of logins •  Which advertisements did the user click on? •  Which offers has the user been interested in? examples Data from analytics examplesexamples
  37. 37. © Copyright 2014 Digital Leadership GmbHDigital Leadership … and no personalization & targeting 38 Drive marketing •  Optimize On-&Offline Marketing Budget •  Targeted multichannel campaigning Drive product recommendations, online marketing & sales •  3D realtime campaign management Drive advisory across the branch network •  Advice customers holistically with consideration of their (saving) goals, lifestyle, expenses, overall financial situation and dreams Drive content & features •  Drive content towards each sub-segment and potentially against real-time micro-segments Unified Consumer Banking Data Model
  38. 38. © Copyright 2014 Digital Leadership GmbHDigital Leadership Relaunch: align business & IT on the longer term! Excerpt of the Digital Leadership Strategy Framework 39 Stakeholders + other inputs Expected Benefits Overall Direction “The Product” Costs Business Case Approach & Plan Stakeholder identification Personas Initial market & competitive analysis Other inputs to needs Departmental inputs Benefits identification Benefits breakdown & prioritization BI & Analytics review Initial opportunity identification Vision Goals Business objectives Project Motivation Key user tasks Cross-channel customer experience journeys Scope Landscape Roadmap Content org model Site org model Technical architecture Draft cost breakdown Initial project plan Organisational setup post launch Cost assumptions Business case Funding options Business Case presentation Initial draft plan till go-live Project plan strategy & concept phase 1 2 3 4 5 6 7
  39. 39. © Copyright 2014 Digital Leadership GmbHDigital Leadership Understanding the areas of value creation 40 Online-Banking The Online-Banking Strategy Framework Prioritized benefits = strategic objectives Benefits sought Enable Online Data for branch advisory Marketing Enable Online-Data for Offline-Marketing Unified data collection Increased customer retention Stickiness of the site Chat & video Online self-advisory tooling Multibanking Financial literacy Financial planning Loyalty program Advisory Financial vision Bundling Higher share of wallet Realtime segmentation & targeting Improved product information Connection with loyalty program User centered scenarios On-site & conversion measures Increased customer acquisition Off-site marketing Off-site measures Content marketing SEM & SEO Affiliate marketing Recommendation mar- keting Ratings & Reviews Analytics, goals & AB testing Competitive comparison Cross-channel Multibanking core Ajusting channel mix Adjusting for all screen sizes Mobile push Online- / Offline conversion scenarios Creating a large screen experience Customer support Cost reductions Improved maintainability IT Higher scalability Centralized IT development Improved integrability Less customer service incidents Improved perception of support / help Operations Decreased content maintenance effort Improved campaign management Professional usability Necessities / must do’s Move away from aging platform Legal requirements Mobile integration
  40. 40. © Copyright 2014 Digital Leadership GmbHDigital Leadership Governance Security & compliance Technology Integration System Administration Access & Channels Roles & responsibilities Collaboration & support Organization & structure Brand & Perception Media & Content Behaviour & Functionality Site setup & structure User needs Corporate goals Vision Objectives, goals & KPIs Feedback mechanisms Outside of DC Governance Digital Channels Governance Focus Areas Direc tion IT Peo ple Core com ponents
  41. 41. © Copyright 2014 Digital Leadership GmbHDigital Leadership Governance focuses on the discrepancy to goals Security & compliance Technology Integration System Administration Access & Channels Roles & responsibilities Collaboration & support Organization & structure Brand & Perception Media & Content Behaviour & Functionality Site setup & structure User needs Corporate goals Vision Objectives, goals & KPIs Feedback mechanisms Outside of DC Governance Digital Channels Governance Focus Areas Direc tion IT Peo ple Core com ponents
  42. 42. © Copyright 2014 Digital Leadership GmbHDigital Leadership What have we done today?
  43. 43. © Copyright 2014 Digital Leadership GmbHDigital Leadership We have considered about 25 challenges banks may have to address
  44. 44. © Copyright 2014 Digital Leadership GmbHDigital Leadership But which one is important?
  45. 45. © Copyright 2014 Digital Leadership GmbHDigital Leadership A proposal for a basic prioritization framework Depths(of(product(/(offering( Customer(needs(/(business(need(
  46. 46. © Copyright 2014 Digital Leadership GmbHDigital Leadership 1) Plotting of potential actions Customer(needs(/(business(need( Depths(of(product(/(offering( Smartphone / photo customer sign-up Next gen UX Intelligent alerts PFM analysis of financesMobile payment Multibanking Financial planning (transparent) product reviews *exemplary plotting of potential actions
  47. 47. © Copyright 2014 Digital Leadership GmbHDigital Leadership 2) Understanding how these action items are likely to evolve in the marketplace Customer(needs(/(business(need( Depths(of(product(/(offering( Smartphone / photo customer sign-up Next gen UX Intelligent alerts PFM analysis of financesMobile payment Multibanking Financial planning (transparent) product reviews *exemplary plotting of potential actions
  48. 48. © Copyright 2014 Digital Leadership GmbHDigital Leadership 3) Final step: Where should we focus on? Customer(needs(/(business(need( Depths(of(product(/(offering( Smartphone / photo customer sign-up Next gen UX Intelligent alerts PFM analysis of financesMobile payment Multibanking Financial planning (transparent) product reviews Continue investments Delete Minor investments, unless important niche clientele Invest heavily *exemplary plotting of potential actions
  49. 49. © Copyright 2014 Digital Leadership GmbHDigital Leadership Services & Consulting for Digital Leadership © Copyright 2014 Digital Leadership GmbH Q&A Stefan F. Dieffenbacher - Brussels, 21st of August 2014 50
  50. 50. © Copyright 2014 Digital Leadership GmbHDigital Leadership Services & Consulting for Digital Leadership © Copyright 2014 Digital Leadership GmbH Thank you! Stefan F. Dieffenbacher - Brussels, 21st of August 2014 51
  51. 51. © Copyright 2014 Digital Leadership GmbHDigital Leadership Contact details Stefan F. Dieffenbacher Executive MBA, PMP, CPM, Scrum Master Managing Director Digital Leadership GmbH Landsberger Straße 217 D-80687 München +49 (0)176 / 638 020 11 +49 (0)89 / 748 600 32 sd@digital-leadership.net www.digital-leadership.net mobile: office: e-mail: Internet: Let me know how I can help!

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