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Impact of Hyperconnectivity on Retail Banking - BarCampBankParis7


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Apparently, the Internet has had no impact on retail banking. Branch banks, with a universal banking model, are still the dominant form, and online interfaces are predominantly used by customer of these banks. Pure online banks are only for a limited number of customers, those with multiple bank accounts, a way to access specialized services and are considered as second banks by them.
With the advent of hyper-connectivity, the difficult relationship that retail banks have with their customers are about to experience a major change. Instead of being an infrequent (and often unpleasant) source of services, banks can become service providers of a constant, and positive interaction, engaging in a totally renewed relationship.

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Impact of Hyperconnectivity on Retail Banking - BarCampBankParis7

  1. 1. Impact of Hyper-Connectivity on Retail Banking 28 January 2012 Paris 2012 Financial Breakthroughs
  2. 2. WHAT ARE FINANCIALBREAKTHROUGHS? 2 2012 Financial Breakthroughs
  3. 3. 32012 Financial Breakthroughs
  4. 4. 10 YEARS ON AFTER INTERNETBANKING “BIG BANG” 4 2012 Financial Breakthroughs
  5. 5. The continuing success ofuniversal banking• Definition: universal bank here as a bank trying to offer all type of services to its customers (not necessarily to all type of customers) • Sitting on a network of branches and ATMs • Offering an online access • And a mobile access, even if reluctantly • Always wondering if a customer does not cost more than the revenue they generate • Terrible understanding of average and marginal costs 5 2012 Financial Breakthroughs
  6. 6. Where is online today inEurope?• In Europe, use of online banking varies by region: • 62%-77% of banking users use online banking in Northern Europe • 35-54% in the core of Europe (France, UK, Germany) • But less than 32% in Southern Europe• But these online users are on a majority users of the online interface of their branch bank• And they are mildly interested by what they are offered: • Only half of the online users are interested or very interested by online banking in Germany 6 2012 Financial Breakthroughs
  7. 7. WHAT IS CRITICAL IN THIS GAME? 7 2012 Financial Breakthroughs
  8. 8. Daily Banking• Deposits, payments, management of balance• First Bank & Second Bank • First Bank is the hub of client’s financial life • Second Bank is a bank account specialized for specific services (savings, investments, credits)• Average cost is much higher than marginal cost, bringing a constant pressure downward • even if competition pressure is particularly low • Barriers to entry (legal and capital requirements) • Low interest of customers to use their bargaining power • Complexity of the field • Only downright collusion can avoid this economic structural 8 imbalance pushing prices downwards 2012 Financial Breakthroughs
  9. 9. Why this relationship isdifficult:• Banks always trying to bring back daily banking revenue back to average cost • Hold-up fees • Illogical fees• Customers not perceiving the value of the service • Why should I pay since you use my money for other things? • Why should I pay since other banks would be happy to have me as a customer? • Why do you have to read evey fine print lines? 9 2012 Financial Breakthroughs
  10. 10. Banking Business Models• Universal banking • Propose every type of banking services to their customers • Offer daily banking for a low cost (free for “good” customers), because they cover the cost with the other services• Specialized banking • Propose a selection of banking services (e.g. savings, invesments, credits) • Offer a usually limited version of daily banking to increase value of their proposition 10 2012 Financial Breakthroughs
  11. 11. WHAT HYPER-CONNECTIVITY BRINGSTO THE TABLE? 11 2012 Financial Breakthroughs
  12. 12. What is hyper-connectivity?• 70% of EU-27 users have an Internet access• 19.7% of mobile users access Internet at least once a month in EU-5 (UK, France, Germany, Spain, Italy).• It’s no longer information when you need it, but as soon it is relevant. 12 2012 Financial Breakthroughs
  13. 13. Why does it mean a verydifferent relationship?• Customers sees value in information coming from the provider, it’s part of the service• Customer is not in an “infrequent – high value per encounter” relationship, but in a “constant – small value per items, but large value in total” relationship• Customer is no longer dedicating a fixed portion of their time to a specialized activity, but is executing a series of micro- tasks, consuming information, reacting to new elements, initiating new actions 13 2012 Financial Breakthroughs
  14. 14. IMPACT AND STRATEGIES 14 2012 Financial Breakthroughs
  15. 15. What is impacted?• User category • Cash flow neutral user constantly need to monitor their position• Daily banking • It is a recurrent and relatively frequent relationship • It is the highest value banking service • It badly needs to rebuild its relationship model 15 2012 Financial Breakthroughs
  16. 16. What strategies for whom? Are you an universal bank Yes No Create a new line of Are you satisfied being a 2nd business for selected bank for your customers segments with high No proportion of hyper- Yes connected customers Improve your banking Target a selected relationship with your segment and create a hyper-connected customers completely new banking relationship 16 2012 Financial Breakthroughs
  17. 17. TO GO FURTHER 17 2012 Financial Breakthroughs
  18. 18. Read our whitepaperIf you want to get more information, you can download our newwhitepaper:Impact of Hyper-connectivity on Retail Banking 18 2012 Financial Breakthroughs
  19. 19. Or contact usFinancial BreakthroughsWeb : http://www.finthru.comTwitter :édéric Baud Nicolas Guillaume+33 6 4369 3724 +33 6 1998 19 2012 Financial Breakthroughs