This document discusses the opportunities and risks for banks in the digital world. It argues that simply becoming more digital will not be enough for banks to fend off new competitors from other industries. It proposes that banks adopt a strategy of becoming an "Everyday Bank" by playing a deeper role in customers' digital and commercial lives beyond just financial transactions. Examples are given of companies like Alibaba, PayPal, and Square that have been successful in expanding into banking and payments. Regulatory barriers to entry may be lower than in the past, posing new competitive threats to traditional banks.
Technology-driven change has become a constant for merchants,
financial institutions, and processors. That reality has created a shifting
landscape of new capabilities, new competitors, new rules, and new
customer expectations. It can all be complicated and confusing, but an
assessment of that landscape indicates several clear trends affecting
the industry. For more info: www.nafcu.org/vantiv
Holvi, Seed, CivilisedBank, Tide, Qonto, Azlo, Penta, Arival bank
Neobanks or fintechs for retail clients, which have launched business accounts recently: TransferWise, Revolut, StarlingBank, N26
(c) Life.SREDA VC
Banking Disruption in Financial Services: Threats and OpportunitiesDogTelligent
There are three forces shaping the future of banking. Technology innovation is the first. For most traditional financial institutions -- banks and credit unions -- technology innovation is a weakness; instead, they rely on third-party firms ranging from established core providers to startups to provide them with a mix of products that they repackage and resell to their customers. Demographics is the second force. Millennials now account for 25% of the US population with 80 million and growing. The third force is the emergence of new business models on the one hand driven by Millennial demand and communication preferences, and on the other, enabled by new technologies as they are invented.
The report examines data from multiple sources and suggests potential defenses for institutions to fend off competitive threats from technology, retail, and telecom firms that are gaining traction in the payments and banking arenas.
Technology-driven change has become a constant for merchants,
financial institutions, and processors. That reality has created a shifting
landscape of new capabilities, new competitors, new rules, and new
customer expectations. It can all be complicated and confusing, but an
assessment of that landscape indicates several clear trends affecting
the industry. For more info: www.nafcu.org/vantiv
Holvi, Seed, CivilisedBank, Tide, Qonto, Azlo, Penta, Arival bank
Neobanks or fintechs for retail clients, which have launched business accounts recently: TransferWise, Revolut, StarlingBank, N26
(c) Life.SREDA VC
Banking Disruption in Financial Services: Threats and OpportunitiesDogTelligent
There are three forces shaping the future of banking. Technology innovation is the first. For most traditional financial institutions -- banks and credit unions -- technology innovation is a weakness; instead, they rely on third-party firms ranging from established core providers to startups to provide them with a mix of products that they repackage and resell to their customers. Demographics is the second force. Millennials now account for 25% of the US population with 80 million and growing. The third force is the emergence of new business models on the one hand driven by Millennial demand and communication preferences, and on the other, enabled by new technologies as they are invented.
The report examines data from multiple sources and suggests potential defenses for institutions to fend off competitive threats from technology, retail, and telecom firms that are gaining traction in the payments and banking arenas.
We were asked to give a mobile banking planning/education chat with some agency folk here in NYC. This is a version of that deck/convo.
"A growing polarization between leaders and laggards as visionary financial institutions rise to the challenge of calamity and move ahead of their weaker competitors. Mobile represents a necessary step forward for all retail banks."
Mobile Wars: Fintech vs. Banks... and Big Tech in AmbushKatia Bazzocchi
Pure mobile banks gain users daily, as they benefit from accessible smartphone technology. Millenials are the principal users of mobile banks, and will soon be followed by Generation Z. As consumer expectations continue to be shaped by new technology and innovative consumer affairs, a full mobile strategy is key for traditional banks to maintain market share.
Banking & Innovation: How Financial Services Can Embrace the Customer RevolutionComrade
Financial services companies are increasingly seeing opportunities to be at the forefront of innovation. Historically, banks have been slow to translate consumer demands into technologies like paperless statements and mobile check imaging. However, they were quick to implement online banking and, today, customers who bank online are typically more satisfied as well as more cost-effective to maintain. Banks have also responded to the shift in consumer demand for mobile banking on tablets and smartphones. The next challenge facing financial services is how to address the rise of consumer trends evolving mainly outside of the industry. We’re pleased to have partnered with Matchi to publish “Banking & Innovation: How Financial Services Can Embrace the Customer Revolution." This paper focuses on three phenomena that will ultimately impact every bank:
- Crowdsourcing
- Wearable Technology
- The Sharing Economy
We explore the state of each these trends, and how they relate to financial services.
The Future of Bank Branches Coordinating Physical with DigitalCapgemini
Digital Technologies will Accelerate Branch Transformation, Not Make Them Extinct
Retail banking is evolving at an accelerated pace. Globally, banks are facing disruptions from multiple directions. Business and economic realities have reduced the total number of US bank branches by 3,000 between 2009 and 2012 - a decrease of 3% over the 3-year period. In Spain alone, banks have closed 5,000 branches or 12% of their overall capacity since the financial crisis began in 2008, lowering the total branch count to approximately 40,000 in 2012.
That is not all. Digital technologies have also brought a significant shift in consumer banking behavior. The percentage of US banking customers who prefer to bank online jumped to 62% in 2011, up from 36% the previous year. Today, four of the top five transactional banking activities in North America – bill pay, viewing balances/transactions, viewing statements and money transfer – are happening online.
This brings us to the key question of this paper: do brick-and-mortar branches have a role to play in the future of retail banking?
Digital challenger banks are simplifying the financial world, creating a customer centric approach to services, and transforming the way banking is viewed by the public and the market
Balancing Fraud & Customer Experience in a Mobile WorldComrade
Consumers’ reliance on mobile continues to skyrocket in shopping, paying for bills, managing finances and socializing. This poses a great challenge for retailers, financial institutions and technology vendors. Digital account opening is fraught with pitfalls as the identity validation process relies on manual entry of personal information. Similarly account management uses knowledge-based authentication but can add friction to the user experience. How should retailers, banks and merchants integrate fraud protection measures into the user experience with the least amount of friction to the user?
I joined joined Al Pascual from Javelin Strategy & Research in a complimentary webinar to share lessons learned from working with leading companies that have struggled with the issue of fraud and customer experience.
We explored the following:
- Who are leaders in integrating fraud prevention into the user experience?
- Who owns the fraud prevention process in the organization?
- How to overcome legacy design issues that can underwhelm the customer experience and inhibit security measures?
- How to prevent fraud in a low-friction environment, while communicating a security-forward brand experience?
Presentation for Government Blockchain Association l San Juan, Puerto Rico l Piloto 151, 7'June 2018
(c) Vladislav Solodkiy, A.ID
www.followthemoney.id
Gen Y consumers will earn 46% of the income in the United States by 2025, but they’re often misunderstood or ignored by financial services providers. This is especially true when it comes to online and mobile behavior and attitudes toward traditional banking.
Understanding this problem and designing to overcome it is critical to our work at Comrade, so we’re pleased to have partnered with Javelin Strategy & Research to publish “The Three Costliest Myths about Gen Y". This report applies consumer data to dispel the myths circulating in financial services today about Gen Y consumers. Beyond exposing pervasive misconceptions, it also explains how to optimize digital and physical touchpoints to attract tomorrow’s most profitable bank customers.
For those who are asking where the banking industry is headed, how a GAFA Bank will look like, what banks can do to bridge the existing digital gap, and even leverage the disruption - here is a short summary.
To win against non-traditional competitors, retail banks must streamline operations and create innovative products and services, based on mobile, social and analytics technologies.
Keynote de Ron Shevlin en Next Bank Madrid 2013finnovar
Esta fué la presentación de Ron Shevlin en el Next Bank Madrid del pasado 25 de Junio 2013. Ron Shevlin es Senior Analyst de Aite Group y Autor del blog Snarketing2.0.
The 7 Biggest Technology Trends To Disrupt Banking & Financial Services In 2020Bernard Marr
New technology changes the operations and realities of organizations in all industries when it is widely adopted. It's no different with the latest innovation introduced by artificial intelligence, blockchain, and other technology. Here we look at the 7 biggest technology trends that will disrupt banking and financial services in 2020.
Early Stage Fintech Investment Thesis (Sept 2016)Earnest Sweat
Here is an example of a personal investment thesis that I created to share with venture capital firms. In this example, I provide my personal perspective on the fintech sector. For details on how I build this thesis check out my blog (https://goo.gl/CU4Qid).
Note: Some of the confidential information has been redacted for privacy.
How is artificial intelligence changing the banking and financial industryJacklin Berry
AI can improve customer personalization, identify patterns and connections that humans can't, and answer questions about banking issues in real-time. Financial institutions are already finding success with AI. However, what may be 'amazing' today will be table stakes in the near future.
We were asked to give a mobile banking planning/education chat with some agency folk here in NYC. This is a version of that deck/convo.
"A growing polarization between leaders and laggards as visionary financial institutions rise to the challenge of calamity and move ahead of their weaker competitors. Mobile represents a necessary step forward for all retail banks."
Mobile Wars: Fintech vs. Banks... and Big Tech in AmbushKatia Bazzocchi
Pure mobile banks gain users daily, as they benefit from accessible smartphone technology. Millenials are the principal users of mobile banks, and will soon be followed by Generation Z. As consumer expectations continue to be shaped by new technology and innovative consumer affairs, a full mobile strategy is key for traditional banks to maintain market share.
Banking & Innovation: How Financial Services Can Embrace the Customer RevolutionComrade
Financial services companies are increasingly seeing opportunities to be at the forefront of innovation. Historically, banks have been slow to translate consumer demands into technologies like paperless statements and mobile check imaging. However, they were quick to implement online banking and, today, customers who bank online are typically more satisfied as well as more cost-effective to maintain. Banks have also responded to the shift in consumer demand for mobile banking on tablets and smartphones. The next challenge facing financial services is how to address the rise of consumer trends evolving mainly outside of the industry. We’re pleased to have partnered with Matchi to publish “Banking & Innovation: How Financial Services Can Embrace the Customer Revolution." This paper focuses on three phenomena that will ultimately impact every bank:
- Crowdsourcing
- Wearable Technology
- The Sharing Economy
We explore the state of each these trends, and how they relate to financial services.
The Future of Bank Branches Coordinating Physical with DigitalCapgemini
Digital Technologies will Accelerate Branch Transformation, Not Make Them Extinct
Retail banking is evolving at an accelerated pace. Globally, banks are facing disruptions from multiple directions. Business and economic realities have reduced the total number of US bank branches by 3,000 between 2009 and 2012 - a decrease of 3% over the 3-year period. In Spain alone, banks have closed 5,000 branches or 12% of their overall capacity since the financial crisis began in 2008, lowering the total branch count to approximately 40,000 in 2012.
That is not all. Digital technologies have also brought a significant shift in consumer banking behavior. The percentage of US banking customers who prefer to bank online jumped to 62% in 2011, up from 36% the previous year. Today, four of the top five transactional banking activities in North America – bill pay, viewing balances/transactions, viewing statements and money transfer – are happening online.
This brings us to the key question of this paper: do brick-and-mortar branches have a role to play in the future of retail banking?
Digital challenger banks are simplifying the financial world, creating a customer centric approach to services, and transforming the way banking is viewed by the public and the market
Balancing Fraud & Customer Experience in a Mobile WorldComrade
Consumers’ reliance on mobile continues to skyrocket in shopping, paying for bills, managing finances and socializing. This poses a great challenge for retailers, financial institutions and technology vendors. Digital account opening is fraught with pitfalls as the identity validation process relies on manual entry of personal information. Similarly account management uses knowledge-based authentication but can add friction to the user experience. How should retailers, banks and merchants integrate fraud protection measures into the user experience with the least amount of friction to the user?
I joined joined Al Pascual from Javelin Strategy & Research in a complimentary webinar to share lessons learned from working with leading companies that have struggled with the issue of fraud and customer experience.
We explored the following:
- Who are leaders in integrating fraud prevention into the user experience?
- Who owns the fraud prevention process in the organization?
- How to overcome legacy design issues that can underwhelm the customer experience and inhibit security measures?
- How to prevent fraud in a low-friction environment, while communicating a security-forward brand experience?
Presentation for Government Blockchain Association l San Juan, Puerto Rico l Piloto 151, 7'June 2018
(c) Vladislav Solodkiy, A.ID
www.followthemoney.id
Gen Y consumers will earn 46% of the income in the United States by 2025, but they’re often misunderstood or ignored by financial services providers. This is especially true when it comes to online and mobile behavior and attitudes toward traditional banking.
Understanding this problem and designing to overcome it is critical to our work at Comrade, so we’re pleased to have partnered with Javelin Strategy & Research to publish “The Three Costliest Myths about Gen Y". This report applies consumer data to dispel the myths circulating in financial services today about Gen Y consumers. Beyond exposing pervasive misconceptions, it also explains how to optimize digital and physical touchpoints to attract tomorrow’s most profitable bank customers.
For those who are asking where the banking industry is headed, how a GAFA Bank will look like, what banks can do to bridge the existing digital gap, and even leverage the disruption - here is a short summary.
To win against non-traditional competitors, retail banks must streamline operations and create innovative products and services, based on mobile, social and analytics technologies.
Keynote de Ron Shevlin en Next Bank Madrid 2013finnovar
Esta fué la presentación de Ron Shevlin en el Next Bank Madrid del pasado 25 de Junio 2013. Ron Shevlin es Senior Analyst de Aite Group y Autor del blog Snarketing2.0.
The 7 Biggest Technology Trends To Disrupt Banking & Financial Services In 2020Bernard Marr
New technology changes the operations and realities of organizations in all industries when it is widely adopted. It's no different with the latest innovation introduced by artificial intelligence, blockchain, and other technology. Here we look at the 7 biggest technology trends that will disrupt banking and financial services in 2020.
Early Stage Fintech Investment Thesis (Sept 2016)Earnest Sweat
Here is an example of a personal investment thesis that I created to share with venture capital firms. In this example, I provide my personal perspective on the fintech sector. For details on how I build this thesis check out my blog (https://goo.gl/CU4Qid).
Note: Some of the confidential information has been redacted for privacy.
How is artificial intelligence changing the banking and financial industryJacklin Berry
AI can improve customer personalization, identify patterns and connections that humans can't, and answer questions about banking issues in real-time. Financial institutions are already finding success with AI. However, what may be 'amazing' today will be table stakes in the near future.
Why Banks Must Become Smart Aggregators in the Financial Services Digital Eco...Cognizant
Financial institutions must embrace a partnership-driven approach to remain relevant amid fintech digital disruption, while evolving their capabilities to deliver against tomorrow’s market needs.
Every problem has an opportunity: while challenger banks are thriving, incumbents are sourcing open banking capabilities to catch up. In the Banking Automation Bulletin, VP of Strategy Tim Rutten shares his thoughts on how incumbents can develop the best
Software is having an impact on everyone’s lives and we’re fascinated by its effect on user behavior. Building on our existing financial sector expertise, Beyond wanted to fully understand how people’s behavior is changing in one of the world’s oldest industries and what this change means for the future design of products and services in banking.
Taking friction out of banking white paper - UKNils Mork-Ulnes
In our white paper, ‘Taking the friction out of banking’ we research the threat from disruptive FinTech start-ups and look into designing for banking innovation with a focus on improving the digital experience for increasingly digitally-focused consumers.
Taking friction out of banking white paper - USNils Mork-Ulnes
In our white paper, ‘Taking the friction out of banking’ we research the threat from disruptive FinTech start-ups and look into designing for banking innovation with a focus on improving the digital experience for increasingly digitally-focused consumers.
Software is having an impact on everyone’s lives and we’re fascinated by its effect on user behavior. Building on our existing financial sector expertise, Beyond wanted to fully understand how people’s behavior is changing in one of the world’s oldest industries and what this change means for the future design of products and services in banking.
Six Fintech Trends of Foremost Importance in 2017eTailing India
The scourge of innovation in the financial sector has long been the legacy technology on which banking systems are built. Whether back, middle or front office, inefficient and uncompromising systems have hindered improvements to customer service and expectations.
The high rate of technology penetration is affecting the state of financial services:
• Collaboration economy – driven by social media
• On the go behavior – driven by intensive lifestyles and the rise of mobile technology
• Convenience seeking – driven by connectivity (“the internet of things” and wearable technology)
Time spent on social networking by internet users worldwide is on the rise, causing more sharing and peer to peer behaviors resulting in the “collaboration economy”.
Global Mobile penetration continues to rise, giving birth to more on the go/ mobile financial solutions. Rising penetration of Wearable Technology offers opportunities for companies.
In the EU, online banking adoption rates are 49% in the EU, and in other countries, USA included, penetration surpassed 50%.
We expect Mobile financial services to grow at an accelerated rate, due to the increase in solutions offered through mobile devices as well as younger demographics demand for ultra-convenient solutions. According to the Federal Reserve, in the USA, use of mobile banking continues to rise but is yet to reach the rates of online banking: 43% of all mobile phone owners, and 53% of all smartphone owners with a bank account, had used mobile banking in the 12 months prior to the survey, compared to 71% who used online banking on a desktop, laptop or tablet computer in the same period.
Accelerating the Open Banking API JourneySheriff Shitu
A review of what Open Banking APIs seem like in the eyes of banks. The article looks at the reality of inherent challenges of opening up data and internal capabilities (technical, compliance, and business), presents possible learnings available from other industries, and suggests a roadmap for adoption of Open APIs through an analysis of patterns spotted at banks that have completed the Open Banking API journey.
The convergence of non-traditional rivals and heightened global regulation are creating new digital opportunities for banks. To seize the high ground, banks need to think like disruptors and apply modern digital tools, techniques and partnership strategies.
Impact of Digital Transformation in Retail Banking Market in the UK.pptxMaveric Systems
With a slew of hyper-personalization initiatives, the UK’s retail banking market responds to increasingly intelligent devices, rapidly evolving CX, and real-time data processing. Coming on the back of a ravaging pandemic, stung with financial hardships, retail banks, like most banking organizations, scramble to reimagine a new future.
The Emergence of Open Banking and COVID-19Sam Ghosh
Think about Google if it were only collecting a lot of data but never used or shared that data with anyone. That is how the traditional financial service companies are - they have enormous amounts of data but rarely use that data for any tangible purpose. Dormant data with the financial service providers can be used to not only create new applications but revolutionize credit markets, personal finance, business finance, wealth management, etc. in ways we cannot even totally envisage now.
Open Banking is a practice where banks provide access to consumer data to non-affiliated third parties generally through Application Programming Interfaces or APIs. Open Banking in the coming years is expected to lead a paradigm shift in Banking and Finance.
During the pandemic, the demand side of the equation for Open Banking is rapidly developing with growth in fintech markets and the adoption of digital channels by the consumers.
Both banks and tech companies have immense incentives to grab this opportunity and quickly tap the growth in digital markets and channels.
Concerns about data security, compliance with privacy laws, and regulatory uncertainties are acting as impediments to the growth of Open Banking.
Banks need to act quickly to leverage data to increase their reach and role. Traditional banking is rapidly getting commoditized and banks need to add data-driven value-added services in their portfolio to remain relevant. Value-added services such as personal financial planning, the alternative credit assessment, and real-time payments can not only create new revenue sources for the banks but provide strategic moats in the competitive landscape. Banks can achieve this through strategic partnerships and acquisitions. In-house development is difficult given the cultural shift needed in the banking sector may take time. Apart from that, the IT in the banking sector is generally focussed on regulatory requirements and not data-driven, customer-focused as required for Open Banking initiatives.
Policy uncertainty can severely hamper the growth of Open Banking. Policymakers need to balance caution on security-privacy matters but at the same time clear policy confusion to allow the sector to grow.
As per the Akamai report, “2020 State of the Internet / Security: Financial Services – Hostile Takeover Attempts”, cyber attackers are increasingly targeting API endpoints of financial services.
As per a Gartner report, by 2021, APIs will account for 90% of the attack surface. By 2022, according to Gartner, API abuses will become the most-frequent attack vector.
This is a cause of concern for the Banks contemplating opening up data access using APIs.
3. Introduction
There is both opportunity and risk for banks in
the digital world. In order to confront new and
non-traditional threats, they must focus on
playing a deeper role in the everyday digital and
commercial lives of their customers.
Digital technologies are dissolving
the boundaries between industry
sectors. Banking is no exception;
in fact, non-banks may be poised to
become as integral to the banking
value chain as the incumbents in the
not-too-distant future. Accenture
estimates that competition from
digital players could erode as much
as one-third of traditional retail
bank revenues by 2020.1
For banks, the risk is that
competitors from other industries
will consign them to a limited
role as utilities, just as industry
profitability stagnates and customer
loyalty becomes more tenuous.
Accenture’s research and
experience suggest that simply
“being more digital”—creating
upgraded, digital, or mobile-
friendly versions of existing
products and services—will not
be enough to fend off these new
challenges.
In order to avoid disintermediation
and generate value in the digital
world, banks will need to move
beyond their traditional role as
enablers of financial transactions
and providers of financial products
and play a deeper role in the
digital and commercial lives of
their customers. We refer to this as
the “Everyday Bank” strategy.
Besides financial transactions, an
Everyday Bank can help customers
with advice, access, and the
information they need to make
decisions. This allows banks to
position themselves as trusted
partners before, during, and after
the financial transactions that
define customers’ commercial lives.
The Everyday Bank is a strategic
vision, rather than a singular
business or operating model. It
calls for a new way of thinking
about the role of banks in the
digital era.
Simply ‘being more digital’
will not be enough to
address new threats.
It urges banks to apply digital
technologies in new ways and offer
tangible value to customers based
on transaction information. It
also requires collaboration: banks
positioning themselves at the
center of an extended “ecosystem”
that offers consumer benefits
beyond banking.
Accenture believes it is critical
for industry leaders to move in
this direction; in fact, we foresee
strong competitive challenges and
severe threats to profitability for
those that do not.
3
4. Alibaba:
Salutary Warning to Banks
Amazon made waves in late 2012 when
it announced the creation of Amazon
Lending, a service that provides loans
to merchants that sell through the
company’s web platform. At the time, the
move seemed revolutionary for a major
e-commerce provider, and it was—at least
in developed markets. But in fact Amazon
was simply following in the footsteps of
Alibaba, the online behemoth that had
established the practice three years earlier
in China.
Users of China’s dominant e-commerce
website also rely on it for payment
tools, savings vehicles, investments,
and loans. The speed and ingenuity
with which Alibaba has grown offers a
salutary warning to the West’s financial
institutions. It gained a foothold in the
Chinese banking market before many
traditional players saw what was coming.
In only four years’ time Alibaba became
the world’s largest online payments
provider. It ventured into commercial
lending by using data about its small
business members to assess their
creditworthiness, growing its loan book
to $16 billion in three years. The company
became the fourth largest money market
fund, with $87 billion in holdings and
more than 80 million depositors less
than one year after acquiring an asset
management company. By offering
interest rates up to 15 times higher
than standard savings rates, it attracted
the equivalent of 20 percent of all new
Chinese deposits only nine months after
launch.2
Now the company is targeting
expansion into wealth management and
credit cards.
Facing market erosion, incumbents have
urged regulators to treat funds like the
Alibaba money market as ordinary deposit
accounts, which would require Alibaba
to set aside 20 percent of holdings
as reserves. Chinese regulators have
increasingly cited the need for supervision
of online funds, but consistently restate
their importance in bringing financial
innovation to China.
Alibaba’s business plan is particularly
clever in that the company does little of
the financial heavy lifting of traditional
banks.
Indeed Alibaba is not yet a bank, but for
customers it is certainly getting hard to
tell the difference.
Nine months after launch,
Alibaba’s money market
fund had captured one
renminbi for every five
deposited at Chinese banks.
4
5. 5
Radical Shifts
It took Apple only seven years to become
the world’s largest music retailer. In 18
months, Google erased 85 percent of
the market capitalization of top GPS
companies after launching its mobile
maps app. Alibaba, China’s equivalent
to Amazon, became the world’s fourth
largest money-market fund only nine
months after entering the business.
Companies are increasingly venturing
into other industries for growth. In
an Accenture survey, 60 percent of
executives from a cross-section of
industries said their companies intend to
make such moves over the next five years
by way of alliances, joint ventures, or
acquisitions.3
In some parts of the world—notably China,
where 87 percent of executives said they
plan to move into other industry sectors
within five years—industry disruptions
have been shockingly swift (see Alibaba
sidebar on page 4).
This poses a major challenge to
the banking sector at a time when
profitability in developed markets is
still only about half of pre-crisis levels.
And while non-banks are proceeding
aggressively with digital innovations
to capture more and more of the
banking value-chain, new generations
of customers are increasingly open to
alternative banking options (see Figure 1).4
New generations are open
to alternative banking
options.
46%
40%
37%
34%
33%
34%
23%
23%
20%
24%
9%
5%
7%
6%
7%
PayPal
Google
Amazon
Apple
Walmart
18-34Ages: 35-54 55+
FIGURE 1. Open to Alternatives
If these companies offered banking services, how likely would you be to bank with
them?
(Likely or Very Likely)
Source: Accenture survey of 3,846 bank customers in North America, March 2014.
6. 4.8
6.5
8.8
12.0
16.1
35.7%
(CAGR)
21.8
29.2
39.2
53.0
2012 2013 2014 2015 2016 2017 2018 2019 2020
Actual Forecast
Regulatory barriers may be
lower than they seem.
And, rather than slow the proliferation of
peer-to-peer lending networks, they are
studying how to foster the trend by
making them safer. In China, regulators
have begun a pilot program to introduce
privately-held banks; Alibaba and Tencent
are among the first participants. For the
first time in a decade, India’s central bank
is granting new bank licenses to increase
competition with an eye to promoting
non-banks.
6
Change Is
Looming
Change is perhaps most evident in the
payments space, where retail banks
have traditionally generated up to a
quarter of their revenues (sometimes
more). PayPal is now the leading online
payment method in some countries with
more than 120 million digital wallets in
use overall.5
Popular retailers have also
shown remarkable success moving into
payments; for example, the Starbucks
loyalty card handles nearly one-third
of the company’s U.S. transactions.
In Europe, alternative-payments players
represented just 1.5 percent of the market
in 2012; Accenture estimates that figure
will increase to nearly 15 percent by
2020—an annualized growth rate of more
than 35 percent (see Figure 2).
New entrants are moving rapidly into
other traditional areas of banking
as they look to expand the customer
experience. Google now offers a plastic
debit card to go with its mobile wallet.
Telecommunications providers like
T-Mobile in the U.S., Rogers in Canada,
AirTel in India, and SingTel in Singapore
have rolled out similar “wallet” services.
While many new entrants lack the scale
to pose an immediate threat to banks,
this could change quickly. In less than
one year, Walmart and American Express
attracted one million customers with
Bluebird, a pre-paid card that offers a
low-cost alternative to checking (current
account) services in the US. Platforms
like iPhone already have the foundations
to provide seamless and secure mobile
financial services to hundreds of millions
of consumers.6
Small, disruptive startups are also growing
rapidly. Square, the point-of-sale payment-
processing venture, has accumulated
more than four million users since 2009.
According to Accenture research, half of
its North American users would be open
to banking with the company if they
could. Since 2008, global investment in
financial technology startups has tripled
to $3 billion,7
making disruptive “fintech”
players better funded than ever.
Banks are certainly aware of these
threats. When Accenture asked top
banking and financial services executives
to name the biggest structural challenge
they will face in the next five years,
technology and its ability to re-shape
industry boundaries ranked second after
increased regulation.8
In a separate global
executive survey conducted by Accenture
in late 2013, bank leaders cited “new
market entrants” among the three biggest
risks they saw in the year ahead.9
FIGURE 2. Surge in Alternative Payments
Alternative Payments Transaction-Volume Outlook, Europe
(Billions)
Source: Accenture research; analysis of ECB, EPC, WorldPay, Visa data.
Risk of
False Comfort
In the past, regulation has acted as a
barrier to entry to the banking industry
but today the barriers may be lower than
they seem. For example, PayPal has been
a licensed bank in Europe since 2007.
Facebook, which has more than
250 million users in Europe, may soon
be authorized by the Central Bank of
Ireland to handle payments across the
European Union.
Some new entrants have grown rapidly
without ever becoming regulated banks
at all. Google Wallet, T-Mobile, PayPal,
Simple, and Moven have all relied on the
“white-label” services of The Bancorp
Bank to provide regulated banking
services to their customers.
Regulation will provide banks with some
protection, but perhaps not for long. In some
markets regulators are welcoming new
entrants. In the UK, for example, the
authorities have launched an initiative to
make it faster and easier for consumers
to switch checking (current) accounts.
7. 7
Vulnerable Times
These outside threats come at an
inopportune time for banks. In mature
markets, slow growth and high regulatory
costs continue to hold down return-on-
equity, which is expected to hover at or
below the cost of capital through 2016.
Meanwhile in many markets margins and
customer profitability are pressured due
to pricing distortion by so-called “value
thieves.” And while growth is strong in
emerging markets, customers are less
loyal: they are more than twice as likely
to switch providers as in mature markets
(see Figure 3).
Decades-old back office systems also
are a handicap as banks face the wave
of digital disruptors. It is expensive to
digitize customer-facing channels when
back office systems require manual
interventions or added systems to
connect everything. Deep seated profit-
and-loss silos tend to interfere as well.
For example, while alternative payment
technology may look like a bright spot
to a bank’s digital unit, the card division
may see it as little more than a way to
cannibalize revenues.
Pre-Crisis Crisis Recovery New Normal
0
2
4
6
8
10
12
14
16
18
20
2006 2007 2008 2009 2010 2011 2012 2013 2014f 2015f 2016f
FIGURE 3. Slow Growth in Mature Markets
Post-tax ROE outlook, developed market banks
Low Loyalty in Emerging Markets
Source: Accenture analysis, Bloomberg data; 57 largest listed banking groups in developed markets, April 2014.
Percentage of consumers that have switched to another bank for
their primary account or other products within the past year
Number of banks that consumers have done business with over
the past three years
Source: Accenture survey of 7,384 consumers in 32 countries, May-July 2013.
12%
31%
Mature Markets
Emerging Markets 18%
43%
56%
43%
26%
14%
Emerging Markets
Mature Markets
1 Provider 2-3 Providers >3 Providers
8. Driving Cashback
Cardlytics illustrates the unique
position banks are in to deliver value to
customers and generate revenue based on
transaction data.
The model is simple. Merchants target
certain types of customers with loyalty-
marketing offers to which Cardlytics has
access. Banks apply the firm’s analytics
to their transaction data to identify
relevant customers and make offers based
on their past spending. Customers then
find their offers embedded in their online
bank statements—$5 off for their next
purchase at their favorite lunch spot, for
example—and click a button to accept.
The next time they shop at that merchant,
cash is automatically added back to their
account.
For the customer, this is virtually effortless
cash-back on day-to-day spending. One
major U.S. bank has given more than
$17 million back to customers through
the program. Banks share in merchant-
commissions, which are typically in the
range of 10 percent on resulting purchases.
Cardlytics offers a glimpse
at how banks can offer real
value to customers through
transaction data.
A crucial component of Cardlytics’
operations is that purchase data is
analyzed and matched to merchant
promotions without ever leaving the
bank’s firewall. No individual customer
information is shared with merchants
or other outside parties. It is a breath
of fresh air for consumers wary of
data-sharing coupon sites and browser
tracking.
But Cardlytics represents only a sliver
of the potential banks have for using
transaction data to return value to
their customers—and increase revenues.
The possibilities are virtually endless
when we consider the potential for
advanced mobile banking and payments
applications to support such service.
8
9. 9
A New Role
Despite these challenges, banks also
possess inherent competitive advantages
in the digital world. They have large and
relatively “sticky” customer bases; vast
amounts of customer and transaction
data; and valuable know-how in the field
of payments, security, compliance, and
financing—all of which are difficult to
replicate.
Because they act as financial
intermediaries, banks have a unique
understanding of the transactions carried
out between customers and merchants.
Going forward, this transactional
information will be one of their greatest
assets—allowing them to understand
their customers better, provide them
with value-added services, and facilitate
commerce in new ways.
Despite the reputational damage banks
suffered from the financial crisis, they
hold a fundamentally trusted position
in society, as the stewards of assets and
commerce. While the public gives low
ratings to the industry as a whole on
matters of trust, their opinions about the
banks they actually do business with are
far more favorable.10
This is a critical advantage in the digital
era. For example, when it comes to
handling personal data, consumers trust
their bank above any other provider.
Providers that can use the data to deliver
value to them without sharing it with
others are the most favored of all
(see Figure 4).
This puts banks in a potentially
advantageous position. New analytic
technologies make it possible for banks
to use transaction data to deliver savings
to customers and bring revenue—all
from safe within their four walls (see
Driving Cashback sidebar on page 9).
For those that are vigilant about their
trusted relationship, it presents a frontier
for loyalty and growth. But they must
focus on earning the right to a deeper
commercial relationship by maintaining
transparency and inviting customers to
“opt in” for benefits.
5%
8%
12%
14%
21%
23%
27%
41%
Twitter
Amazon
Apple
Facebook
Your broadband
internet provider
Google
Your mobile phone
network provider
Your bank
14%
45%16%
29%
38%
18%32%
8%
If your personal data
is to be used by your
provider only
If your personal data is
shared by your provider
with a third party
Not at all likely Somewhat likely
Not very likely Very likely
70%
26%
FIGURE 4. Offering value through data
Companies that consumers trust most with their personal data Likelihood of consumers to provide personal data in return for
added services and discounts
Source: Accenture survey of more than 23,000 consumers in 23 countries,
Oct-Nov 2013.
Source: Accenture survey of 6,021 consumers in Australia, Canada, India, South
Africa, UK, USA Oct-Nov 2013.
10. 10
The Everyday
Bank
In a digital world, winning and retaining
customers hinges on creating value for
them that enhances the convenience and
quality of their everyday lives beyond
mere transactions. With more interaction,
comes more opportunity for selling.
This point of view is at the heart of the
success of major digital players like Apple,
Amazon, Alibaba and Google.
For banks, this requires a shift in strategic
focus from being a provider of financial
products and services to being a provider
of solutions. Banks cannot respond to
threats simply by “being more digital”—
closing down branches and rolling out
better mobile and online banking services.
To defend their position, they must learn to
play a greater role not just at the moment
of the financial transaction, but before
and afterwards, as well. This is Accenture’s
concept of the “Everyday Bank.”
Banks must learn to play a
greater role not just at the
moment of transactions,
but before and afterwards
as well.
An Everyday Bank has a multi-faceted role
built by collaborating to create “customer
ecosystems.” It helps customers through
the essential and often critical decisions
in daily life. Instead of simply enabling
them to save money and pay for things,
banks have the potential to combine their
vast transactional data with new digital
tools to help customers make decisions on
what to buy, and where and when to buy
it—whether it is dinner and a movie or a
new automobile or home.
There are no perfect examples of the
Everyday Bank today. But perhaps one of
the best is Turkey’s second-largest bank,
which launched a highly sophisticated
mobile app that positions it at the center
of its customers’ financial lives (see
iGaranti sidebar below). Other banks have
also made notable experiments in this vein:
BBVA
BBVA’s acquisition of Simple, a digital U.S.
bank, cast a spotlight on the new generation
of personal financial management (PFM)
tools, which are central to Everyday Bank
strategy. To help customers analyze their
spending, the bank captures more than 80
transaction characteristics each time they
use their debit card. By helping consumers
manage and forecast day-to-day spending,
these kinds of tools help drive trust, loyalty,
and revenue (see PFM sidebar on page 11).
Whereas the average U.S. consumer visits
their bank branch three times per month,11
Simple customers interact with the bank
twice a day.
BNP Paribas Fortis
BNP Paribas Fortis, one of Belgium’s leading
banks, has taken a partnership approach
to facing disruptive threats. It teamed
with Belgacom, the country’s largest
telecommunications provider, to create a
full-blown mobile e-commerce “ecosystem”
for merchants and consumers, dubbed
Sixdots. The platform enables seamless
shopping and payments for consumers via
their smartphones. It is not only accessible
to BNP and Belgacom customers, but to
anyone with a debit or credit card from a
Belgian bank. The platform offers open
accessibility to merchants, as well as full
integration and development support for
merchant apps.
USAA
USAA, a top 30 US bank by assets, pioneered
a car-buying service through its website that
helps with the second-largest purchase in
most consumers’ lives. It delivers information
on the actual selling price of cars (as opposed
to list prices), based on TrueCar data, to give
its customers an advantage in their dealer
negotiations—while also promoting its loans
and insurance. The service saves customers
thousands of dollars on average.
iGaranti: Everyday Mobility
The Everyday Bank will play a greater role
not just at the moment of transaction, but
before and afterwards, as well. Although
no institution fully embodies this strategy,
Turkey’s second largest bank, Garanti, is
among the banks coming closest.
In 2013, the company launched its
iGaranti app with the goal of instigating
a paradigm shift in mobile banking. The
target market was Turkey, but the model
is beginning to resonate around the world.
iGaranti brings the power of mobile-
payments, personal financial management
tools, location-based discounts, and a
long list of customizations to the basic
mobile banking app.
The app applies transaction-data analysis
to deliver savings suggestions to users,
along with estimates on how much
money customers will have in their bank
accounts for the remainder of the month.
It offers “impulse savings” tools and
instantly avails users of the bank’s loan
products.
iGaranti integrates itself into users’
everyday lives by analyzing spending
patterns to provide customized merchant
discounts as well. Partnerships with
Foursquare and several leading Turkish
merchants enables Garanti to tailor
offers to the user’s location.
The app is also innovative when it comes
to payments. Users can go to an ATM—
without an ATM card—and use a QR code
on their phone to withdraw cash. The
same technique works for paying bills
in restaurants and stores.
According to Forrester Research, Inc.,
the iGaranti app registered 150,000
downloads and 100,000 active users
in its first six months. It also drove
$30 million in deposits from savings
products available through the app.12
Garanti’s use of mobile technology to
deliver advice and access beyond mere
banking and payments—and to create
value in the day-to-day lives of its
customers—shows a vision for what it
takes to be an Everyday Bank.
11. The PFM Opportunity
The new wave of personal financial
management (PFM) tools offers a tangible
example of how institutions can begin to
establish an Everyday Bank role.
Consumers in most markets struggle to
manage money. Globally, nearly 85 percent
say they lack confidence that their savings
will be sufficient to cover their financial
needs post-retirement.13
Household
savings rates are declining in most major
developed markets.
The world’s nearly 1.5 billion smartphones
have created an opportune platform for
better day-to-day consumer financial
management. As payment providers
with direct, real-time insight to their
customers’ income and spending patterns,
banks have a unique opportunity to use
this platform to build a deeper, more
valued relationship with their customers
through PFM.
In North America alone, more than two-
thirds of consumers (68 percent) age
18-34 say they would welcome receiving
things like a “safe-to-spend” analysis
from their bank; a near equal percentage
(67 percent) say that receiving such a
service would make them more loyal to
their bank (see Figure 5).
The first generation of PFM tools achieved
mixed results. Though platforms like
Mint.com broke new ground, many early
PFM tools were difficult to use, backward-
looking, and tethered to the PC.
A new generation of PFM tools shows
far more promise. Primarily smartphone-
based, they are handier and less manually
intensive. They also incorporate analytic
technologies that allow users to forecast
their financial situations based on past
spending and help manage spending in
real time wherever they are.
Level Money, a Silicon Valley startup,
has a mobile app that alerts users
when they are overspending based on
income and past behavior. LearnVest
offers free budget-tracking and financial
advice along with its fee-based access
to financial planners. Moven, a digital
bank, provides an app designed to help
customers meet their savings goals
and provides advice on what is “safe
to spend.” Banks like Itau in Brazil and
mBank in Poland also have developed
innovative digital offerings to address
PFM demand.
PFM is a way for banks to begin
leveraging transaction data to deliver
everyday value and interaction with
customers and to create a foundation for
more advanced Everyday Bank strategies
reflected in the case of iGaranti.
Interest in receiving real-time spending
analysis with forward-looking, “safe-to-
spend” advice from bank
FIGURE 5. Serving New Generations
Likely affect of such analysis and advice
on your loyalty to your bank
20%
35%
18-34 35-54 55+
4 (interested)
5 (very interested)
68%
55%
24%
18-34 35-54 55+
4
5 (large increase in loyalty)
67%
58%
35%
48%NorthAmerica
18%
31%
37%
29%
38%
20%
37%
10%
25%
6%
11
Commonwealth Bank
of Australia
Commonwealth Bank of Australia offers
a mobile app that uses “augmented
reality” to help customers the moment
they begin house hunting, and long
before applying for a mortgage loan.
Users simply point their smartphone
camera at a residence and the app brings
up extensive property details, as well as
monthly payment estimates on mortgages
and insurance. The app covers 95 percent
of all residential properties in Australia
and generates 20,000 property searches
per week. Similar tools are being offered
by the likes of Barclays in UK, Hana Bank
in South Korea, and JP Morgan in the
United States, where real estate agents
often have an outsized influence on the
homebuyer’s choice of lender.
Source: Accenture survey of 3,846 bank customers in North America, March 2014.
12. 12
Making It
a Reality
The Everyday Bank needs to be highly
industrialized, with automated front-
and back-office processes that are
well integrated, efficient and scalable.
Institutions have to be able to cope with
complex partnerships, exponential growth
in customer interaction, and exploding
volumes of data. All this will involve big
changes in operations over time.
1. Extending the
‘Ecosystem’
For many banks, the fundamental step will
be to move beyond their traditional
boundaries and develop an ecosystem of
partners to begin creating a deeper
everyday relationship with customers.
Merchant funded reward schemes and
location-based offers present immediate
opportunity. Like in the case of BNP
Paribas Fortis (above), bold and elaborate
partnerships are possible with telcos,
retailers, outside financial institutions,
utilities, technology firms, and other
digital players (see Figure 6).
2. Mastering Analytics
Banks are already searching for ways to
use customer data together with information
drawn from other sources like mobile and
social media to anticipate customers’
needs and deliver timely offers. As banks
tap into new sources of data, the explosion
in data volumes will make real-time
analytics essential across the operation.
3. Embracing
‘Omnichannel’
In some cases, the Everday Bank will be
at the center of the interaction with the
customer; in others they will be in the
background, playing a supporting role as
the customer interacts with ecosystem
partners. To embed themselves in daily
life, banks must press for seamless
integration of the customer experience
across all in branch assisted, and digital
interactions.
4. Creating a Digital Core
The Everyday Bank will demand IT
infrastructure that is highly flexible and
scalable, enabling single customer-views
across multiple entities, dynamic product
bundling, and the management of third-
party products and services in real-time.
This will require open processes that even
today’s leading banks have yet to achieve.
That means core banking itself will need
to evolve into new forms over time as well.
Everyday
Strategy
The Everyday Bank is a strategic vision,
rather than a singular business model and
there are different ways of realizing it. But
the strategy requires banks to collaborate
with other organizations, positioning
themselves at the center of an extended
“ecosystem” that caters to a range of
customer-needs beyond just transactions
and savings products.
Banks need to be:
• Access facilitators: helping customers to
discover products and services relevant
to them, as well as buy them and
maintain them
• Value aggregators: delivering merchant-
funded rewards and discounts on everyday
purchases through loyalty reward
schemes based on volume and scale
• Advice providers: using the insights they
have into customers’ buying patterns to
help them in managing their money and
dealing with big financial milestones
such as major purchases, healthcare, or
retirement
These roles require banks to think and
act differently. Being focused on
customers and making the customer
experience simpler and easier is a given.
Banks must also be able to master the
use of joint ventures, fintech acquisitions
and new branding strategies to head
off digital disruption. And they need to
be prepared to cannibalize their own
traditional businesses, if necessary, in
order to retain customers.
For most banks, it is a difficult
reorientation. The CEO must be a
sponsor and visionary for the bank’s
digital future. This requires a culture
that is open and innovative and rewards
entrepreneurship. In the large often
bureaucratic environments of banks, it
may be necessary to create focused digital
units that will help make the Everyday
Bank strategy a reality.
The value drivers begin with an
‘omnichannel’ and branch optimization,
digital client acquisition, and lead to
digital ecosystem development.
13. 13
FS
N
EEDS SATISFACT
ION
SOLUTI
ON
ORCHESTRATION OF LI
FENEEDS
BANK
AS
VALUEAGGREGATOR
BANKASACCESSFA
CILITATOR
BANK AS ADVICE PROVIDER
INFORMATION&EDUCATION
COMMUNICATION
TRAVEL & LEISURE
HEALTH&PROTECTION
HOM
E
CONSUMER GOODS
TRAN
SPORTATION
Buying
Suggestions Comparator
Ticketing
Polymorphic
Payments
Couponing,
Vouchering,
Loyalty
D-Market
Place
Target
Ads
Ecosystem-based service
Large corporates
Retailer/SMEs/corporates
Phone & internet
Training activities
and education
Newspapers,
magazines
and books
Transportation
& parking
Auto
(buy and repair)
Textiles & footwear
Electrical appliances
FoodElectronics
devices
Fuel
PetsReal estate
(buy or rent)
Electricity & gas
Home cleaning & care
Home repairs
Furnishings
Home security
Health services
Personal
and family
insurance
Car insurance
Flights Events
Hotels
Leisure activities
Restaurants & bars
Sport
activities
FIGURE 6. The Extended Banking Ecosystem
Source: Accenture, The Everyday Bank
14. Conclusion
14
Conclusion
The digital revolution is radically re-shaping just
about every aspect of the banking industry, from
customer service expectations to consumers’
understanding of what a bank is. It is also
enabling companies to venture into other
industries at amazing speeds.
15. 15
Banks cannot simply respond by
becoming more digital versions
of themselves. If they want to
defend their lot, they too must
move outward based on their own
inherent competitive advantages.
Within the decade banks will be
“radically restructured around
data assets,” some commentators
have predicted.14
For many banks,
this must go hand-in-hand with
reorienting themselves from being
providers of products and services
to becoming providers of solutions,
just as the major technology leaders
have done.
It will not happen overnight. In key
markets like North America alone,
70 percent of consumers consider
their relationshisp with their bank
to be transactional in nature,
rather than relationship driven.
The rewards for success, extend
beyond the defense of “fees at risk”
and avoiding disintermediation.
Everyday Banks can drive truly
significant value creation for
both the institutions and their
customers. By multiplying
interactions, they can deliver
new selling (and cross-selling)
opportunities. By enriching data
pools they can improve customer
insight. And all this, of course,
drives new sources of profit.
Banks have an opportunity
to emerge much stronger by
embracing the digital revolution
and reinventing themselves.
As that revolution increasingly
disrupts the competitive landscape,
they may need to move quickly.