Digital Banking Strategy Roadmap - 3.24.15

Digital Banking Strategy Roadmap
March 24, 2015
Strategic Banking Insights

Our Digital World
In today’s Digital World,
consumers expect to have an
interconnected experience
that allows them to use any
digital means to seamlessly
communicate, transact
business, connect with
friends, order products and
services, refill prescriptions,
order pizza and track the
status of the delivery online,
make investment decisions,
track package shipments, etc.
2Digital Banking Strategy Roadmap StrategicBanking Insights

Our Digital World
Not to be left behind,
even Children’s Board
Games are shifting
their business
strategies to conform
to the reality of a
rapidly changing Digital
world.
As a matter of fact, the
average 2-4 year old
child can use a
computer tablet
before they can tie
their shoes.

Current State of Digital Banking
The Banking industry has
evolved to incorporate
Digital technology into its
business products, services,
processes, and operations.
A few, well-financed major
players, have led the way
with innovative Digital
banking options for
customers.

What are the Digital Banking Leaders Offering?
5
Mobile Banking Description of Services Citibank
Bank of
America
Wells
Fargo
Capital
One
Chase
Deposit checks from anywhere √ √ √ √ √
View recent activity for your credit card accounts, including pending
transactions
√ √ √ √
Pay credit card bills and view payments √ √ √ √
Schedule and cancel future credit card payments √ √ √ √
View your available credit line √ √ √ √
Find ATMs & branches nearby √ √ √ √ √
Contact Customer Service 24/7 √ √ √ √ √
Check the balances in your linked accounts—checking, savings, credit card,
home equity or personal lines and loans, and mortgages
√ √ √ √ √
Pay virtually any person or business in the U.S and track payments √ √ √ √
See recent activity √ √ √ √ √
Transfer money between accounts √ √ √ √ √
Transfer money to friends with accounts at other banks √ √ √
Learn the minimum credit card payment due (and due date) √ √ √ √
Track rewards Points √ √ √ √
Schedule appointments with banking specialists √
Report lost or stolen cards √
Receive Cash Back deals on purchases √
Ability to make purchases with ApplePay √ √ √
View Credit Score Online √
Receive alerts of factors affecting credit score √
Digital Banking Strategy Roadmap StrategicBanking Insights

6
Mobile Text Banking Description of Services Citibank
Bank of
America
Wells
Fargo
Capital
One
Chase
View account balances √ √ √ √ √
Credit card payment details √ √
Recent transactions √ √ √ √ √
Additional transactions (up to 15) √ √ √ √
Nicknames for bank and credit card accounts √ √
Support—online or by phone √ √ √ √
View Reward Balances √
Find Branch and ATM Locations √
View Rewards Balances √
Overdraft Protection has been utilized √
Account balance is below/above targeted amount √ √
NSF fee has been charged to the account √ √
A Direct Deposit has been posted to the account √
Transfer money between accounts √
Changes to your personal information √

7
Tablet Banking Description of Services Citibank
Bank of
America
Wells
Fargo
Capital
One
Chase
Manage your accounts in a whole new way that's optimized for your
iPad® or Android tablet
√ √ √ √ √
Finances truly come to life with rich displays, charts, data and more. √
View account balances, check recent activity, make bill payments,
transfer funds or simply read up on personal finance and money
management.
√ √ √ √ √
Access to linked accounts and credit card accounts—check balances,
view recent activity, pay bills and more
√ √ √ √ √
A streamlined flow to quickly set up payments and transfers from
checking/savings, including payments to your credit card account
√ √ √
Interactive, graphic displays to help you visualize your current spending
and plan for your future
√
Easy tools and useful information to help you manage your personal
finances
√

8
Online Banking Description of Services Citibank
Bank of
America
Wells
Fargo
Capital
One
Chase
Live Online Chat Services √ √ √
Online Customer Survey √ √ √ √ √
Online Business Credit Card Application √ √ √ √
Online Consumer Credit Card Application √ √ √ √ √
Open checking and savings account online √ √ √ √ √
Apply for Personal Line of Credit Online √ √ √
Apply for Home Mortgage or HELOC online √ √ √ √ √
Person-to-person ability to send and receive money to individuals with
accounts at other banks
√ √ √ √
Small Business ability to make payments to vendors, employees, or anyone
else, and also send invoices to customers for payment
√ √
Transfer money between checking, savings, credit card, home equity line of
credit, installment loan, mortgage, or investment accounts. √ √ √
Transfer money to my accounts at other banks √ √ √ √
From a single site, you can set up budgets, get organized for tax season and
track spending in all your accounts, even at other financial institutions. Sign
into your all accounts dashboard for easy accounts access and comparison so
you never have to hop from site to site again.
√ √
Year-end credit card spending report summary √ √
Financial Management Software √ √
Enroll in Business Online Banking online √ √
Free Credit Score √

Traditional Banking Model for Delivery of
Products, Services, Marketing, Channels
Underlying Digital Technology
9
Commercial /
Treasury
Management
Retail / Small
Business
Trust / Wealth
Management
Mortgage Insurance

Convergence of Digital Products, Services,
Marketing, Channels, and Delivery
Digital
Banking
Delivery
Cards
ATMs
Internet
Payments
Mobile
Biometrics
Branch
Call
Center
Marketing
As Digital technology continues to
evolve, and as increasing numbers of
consumers embrace the digital
delivery of products and services as
the norm, we will continue to see
the convergence of the various
banking customer touchpoints.
Customers expect a seamless
integration of the Digital experience
from initiation to fulfillment.
As such, banks will need to re-think
their traditional stove-piped and
duplicative Digital delivery
strategies.

Digital Banking Model for Delivery of
Products, Services, Marketing, Channels
Underlying Digital Technology
11
Commercial /
Treasury
Management
Retail / Small
Business
Trust / Wealth
Management
Mortgage Insurance

Traditional Banking Model Versus Digital Banking
Model for Digital Delivery of Banking Services
Traditional Banking Model
• The Bank Branch is the center
of the banking experience
• All interactions with customers
originate with a branch
experience
• Customer definition is confined
to branch footprint
• Digital delivery is layered on
top of branch system
• Duplicative products and
services offered through
various channels
• Inconsistent customer
experience across channels
Digital Banking Model
• The Customer is the center of the
banking experience
• Customers choose how they interact
with the bank. Some may never
enter a branch.
• Customer definition is not confined
to branch footprint
• Digital delivery is the centerpiece of
product & service offerings.
• Product and Service offerings are
tailored to the customer’s delivery
preferences
• Channels are non-existent, which
provides a consistent customer
experience

Implications for Traditional Banks
• Most banks erroneously believe that implementing a Digital
strategy is simply continuing their traditional branch-based banking
strategy, but with a new focus on mobile enablement of some
banking functions.
• However, it is important to point out that a “mobile banking
strategy” is simply a component of an Enterprise Digital Banking
Strategy.
• This distinction is important, because banks that simply layer
mobile delivery on top of a traditional branch-focused delivery
strategy will not achieve the business results they expect.
• Further, whatever limitations the bank has in its current traditional
delivery of banking services will be replicated in its mobile banking
experience, and will not be tolerated by customers.
• And since customers’ digital delivery expectations have been
shaped by their experiences with Amazon, iTunes, eBay, etc., banks
that pursue such a mobile enablement approach will fail.

• Traditional branch-based banks’ competitors are already providing
integrated Digital delivery of banking products and services.
• Banks that are just now focusing on enterprise digital banking
strategies are playing catch-up.
• Therefore, in order to achieve maximum competitive advantage,
The Traditional Bank’s Digital Banking Strategy will need to be a part
of its overall Business Strategy.
• This approach will require a complete re-thinking of the bank’s
business delivery model.
• Banks must also realize that non-banks have entered the digital
banking arena and are offering financial services to customers who
previously depended on banks for these offerings (digital payments,
financial management software, credit cards, loans, account
aggregation, ability to view accounts online, P2P payments, etc.).

• In order to be successful, a bank’s Digital Banking Strategy will
need to be a direct outcome of the organization’s overall
corporate strategy.
• There will also need to be a recognition that the traditional
branch-based banking delivery model needs to be replaced by a
digital banking delivery model.
15
Corporate
Strategy
Business
Strategy
Enterprise
Digital
Strategy
Digital
Delivery of
Products
and
Services

The Bank Business Strategy will Drive the
Digital Banking Strategy
• Consumers expect end-to-end digital delivery of products and
services, from initiation to fulfillment.
• The Digital Banking Strategy will need to focus on enhancing the
customer experience to provide multiple options to interact and
transact business with the bank.
• Traditional branch-based banks will need to re-define who is a
“customer” because this will shape how the bank applies its
Digital Banking Strategy.
– In the new Digital age where, through the use of social media, banks
can “touch” individuals far outside of their branch footprint, a
“customer” should be considered as anyone who comes to your
website to “shop,” or who uses your ATM, or who cashes a check at
your bank, etc.

Redefining the Customer
• If we re-define the customer as anyone who comes to your
website to “shop,” or who uses your ATM, or who cashes a check
at your bank, etc., rather than as defined in a traditional branch-
based banking model as someone who has an account with the
bank, then the digital banking customer experience will be
different than what it is today. Some points to consider:
– Can your bank’s “customers” – with no existing account – apply for a
credit card or open a new checking account online and receive immediate
notice of approval?
– Can your bank’s “customers” – with no existing account – apply for a
personal line of credit or auto loan online and receive immediate notice of
approval?
– Can your bank’s business customers – who have established checking
accounts with the bank – complete the enrollment for BOLB online?

Digital Banking Strategy and Social Media
• 74% of online adults use social media, which has the potential to
provide up-to-date and inexpensive access to customers’
opinions about your bank, your competitors, the banking
industry, which products and services customers want, what
customers don’t like about their banking experiences, etc.
• But on a cautionary note, banks must be careful, because social
media today is still largely unregulated.
• Nevertheless, there are two main types of Social “media”, and
each presents different opportunities for banks in this space:
– Social Media – forums for advertising and pushing the organization’s
brand, products, services, reputation, etc.
– Social Networking – forums for connecting with consumers through a
digital format

Social Networking and Social Media
• Social Networking – forums for connecting with individuals
through a digital format.
– In the digital age, many individuals spend more time connecting and
communicating with others via Social Networks (e.g., Facebook, Twitter,
Instagram, LinkedIn, etc.,) than they do in person.
– These social networks are primarily designed to make “connections” and
build relationships with other individuals, and to share ideas, opinions,
perspectives, etc.
– Banks should NOT try to use social networks as sales tools, because this is
not how customers view this medium. Rather, banks must view social
networks as a global “community relations” venue to foster and enhance
trust, visibility, and value in the organization to the digital community.

Social Networking and Social Media
• Social Media – on the other hand, are forums to share
information with a broad audience as a media relations tool (e.g.,
YouTube). However, unlike traditional media relations formats,
the communications are two-way – individuals have the
opportunity to give their opinions about your brand, customer
service, policies, pricing, etc.
– Social media is a communication channel similar to newspaper,
magazines, radio, etc., and should be used to push the organization’s
brand, products, services, reputation, etc.
– Social media functions as a “truth in advertising” forum similar to an
online Better Business Bureau, because customers have the ability to
comment on the validity of whatever claims banks may make in this
space.

Digital Messaging and Marketing
• In addition to Social Networks
and Social Media, Traditional
banks’ competitors are
gathering and analyzing
customers’ online search data to
understand their buying habits
and preferences.
21
• And through the use of Big Data gathered from partnerships
with Google, Bing, Bankrate.com, Lendingtree.com,
TrueCar.com, etc., these competitors are able to tailor
targeted offerings to customers – far outside of their branch
footprint – each time they engage the digital web whether
via mobile or computer.

Implications for Traditional Branch-Based Banks
• Since Traditional branch-based banks’ Competitors are
already providing integrated Digital delivery of banking
products and services, traditional banks will have to adopt a
digital banking strategy in order to survive.
• The challenge, then, for a traditional bank will be to
realistically evaluate its strategic options for going digital.
• There are basically three options:
– Pioneer/Innovator Approach
– Early Adopter Approach
– Late Adopter Approach

• Pioneer/Innovator Approach
– Benefits:
• Set the standard by which others are compared
• Later entrants are compared – usually unfavorably – to the
pioneers
• Pioneers become the generic “brand” for the industry
– Downside:
• Extremely expensive strategy. Requires large infusions of
funding for R & D, customer focus groups, beta testing, etc.
• There will be some R & D efforts that will be discarded
because they are not accepted by the marketplace.

• Early Adopter Approach
– Benefits:
• Close behind the Pioneers, they benefit from the research
and customers’ reactions to the early prototypes.
• Better able to utilize lessons learned to tweak products and
services for the next phase of delivery.
• Still able to get in on the early market acceptance of the new
technology (e.g., UPS began electronic tracking of packages
after Federal Express).
– Downside:
• Still a costly proposition, but not nearly as expensive as the
Pioneer approach.

• Late Adopter Approach
– Benefits:
• Least costly strategy with minimal risk because the technology
already exists, and customers’ expectations are already
established.
• Not a bad strategy if you have a loyal customer base that will wait
around for you to offer what is already available from the pioneers
and early adopters.
• Can tweak the product based on historical data and experiences of
Pioneers, and create a successful niche that customers want.
– Downside:
• Always in “catch-up” mode.
• Customers who demand the latest technology will likely move on
to banks – and non-banks – with more progressive offerings.

Future Trends in Digital Banking
26
• Chase Bank has already unveiled the next generation of ATMs which use a
mobile phone to authenticate the user.
• Banks are experimenting with allowing users to use their mobile devices
to send withdrawal messages to ATMs, and then dispense the money
when the customer drives through the ATM (like ordering movie tickets
online and then pick up at the theater).
• Expect to see more banks partner with new digital payments vendors such
as Apple, Samsung, and Google to offer these payment options to
merchants and customers.
• Facebook is poised to launch its new P2P payment feature that allows
individuals to send money to any friends on Facebook.
• Mobile banking applications for Small Businesses are already in various
stages of development and deployment.
• Virtual branches are being deployed with no live agents, and where
customers can access interactive video terminals and ATMs to speak to
live agents to withdraw money and handle various banking needs.

Choices for Traditional Branch-Based Banks
• The Digital delivery of banking products and services is already a
reality.
• Like it or not, your customers will compare their digital banking
experience to shopping on Amazon, iTunes, eBay, Southwest Air,
etc., and to their digital experiences with large banks that already
have robust digital banking offerings.
• Traditional banks can’t just push out mobile apps and capabilities to
customers and call it a digital banking strategy. Customers expect a
seamless integration of the entire online banking experience from
initiation to fulfillment. If they are forced to drop off somewhere
along the digital experience to print documents, call a
representative, and/or visit a branch, you have lost the customer.
• In the new digital world, banks will have to understand that
customers do business online 24/7, 365 days a year. As such, banks
will need to have 24/7 online chat capabilities and call centers
available to assist customers who encounter problems online.

• Most traditional banks have some digital banking capabilities, but
they are not equal to what the major competitors offer, and they
are not effectively connected to an enterprise digital strategy that
offers a seamless customer experience consistent with the digital
marketplace.
• Traditional banks will need to re-think their current business models
and realign their traditional branch delivery systems around the
customer, rather than the branch, to realize the benefits of a true
enterprise digital banking strategy. This will be no small task,
because there will be stakeholders throughout the organization
who will resist such an effort.
• There is continued digital convergence across all banking customer
touchpoints and segments that must be considered in any digital
strategy. The implications are much broader than mobile
capabilities.

• In order to transition to a successful digital banking strategy, top
leadership will have to embrace the organizational and cultural
changes that such an undertaking will require.
• There will need to be tight coordination, collaboration, and
engagement among stakeholders in all areas of the bank to guard
against a “stove piped” and “piecemeal” digital strategy
implementation.
• The traditional bank must decide whether it wants to be a Pioneer,
an Early Adopter, or a Late Adopter in the digital banking strategy
space.
• Traditional banks will need to partner with data accumulators and
aggregators to gain deep insights into customers’ needs, wants,
browsing histories, purchase patterns, etc., in order to tailor targeted
product and service offerings to satisfy these needs.
• Traditional banks will need to re-define “customers” in the new
digital age of social networking, social media, and digital advertising.

Next Steps for The Traditional Branch-Based Bank
30
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Digital Banking Strategy Roadmap - 3.24.15

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