The document outlines KeyBank's plan to increase online banking usage through their S.M.A.R.T. strategy. The plan focuses on sustainability, market share, accessibility, retention, and technology. KeyBank will offer new features like mobile deposit, 24/7 online chat, and account switching assistance to attract customers. While these substitutions may initially reduce profits, the benefits of higher customer retention and market share are expected to increase total transactions and profits over the long run. KeyBank estimates potential annual cost savings of $49.1-$84 million from reducing branch costs and $2.8-$16.7 million from lower telephone costs.

1. February 27, 2010

2. Objectives
Increase Online Banking
on KeyBank.com
We’ll Accomplish
This Goal by being
S.M.A.R.T
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3. S.M.A.R.T.
S Sustainability
M Market Share
A Accessibility
R Retention
T Technology
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4. Trends
Gen Y
• By 2014, 80% of Gen Y Households Will Bank Online
• Gen Y Accounts for 40% of Online Banking
Households
People
• Online Banking Users Increasing at Compound
Annual Growth Rate of 20% through 2012
• 600 Million Using Online Banking Globally
Access
• 17% of Consumers Use Smart Phones
• 80% of Households With Internet Access Use it for
Online Banking (88 Million American Households)
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5. The Industry: Online Banking
Oct 2009 Internet Site Ranking
100
69
80
60
40
20
0
Brick-and-mortar banks are also the largest online players, with the resources to bring a wide range of services to their natural
customer base
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6. Comparison Strategy
KeyBank
Bank of
America
Online Mobile Customer ATM Cross Sell Fees Product Branch
Capabilities Capabilities Service Variety Convenience
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8. Mobile Deposit A T
How it Works
1. Open Deposit@keybank.mobile.com
2. Enter the deposit amount and choose
your account.
3. Take photos of your endorsed check.
4. Get confirmation of your deposit
**To be eligible, must have KeyBank MasterCard and/or $10,000 Key
Savings Deposit
How it Increases Online Activity
-Innovative feature attracts young, mass affluent, tech savvy consumers who
are on the go
-By attracting this subset, Mobile Deposit, along with other new S.M.A.R.T
features, will instantaneously increase Keybank.com usage
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9. 24 Hour Online Chat A
Customer
Service Call =
$10
S.M.A.R.T Chat
= $0.3
How it Increases Online
Activity
-Saves Money, Increases Traffic
But How Does Key
-Increase customer’s online
Entice Customers to
comfort levels, thus increasing
online activity
Use This Service?
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10. Switching Made Easy M T
KeyBank will take care of all tasks associated with consumer
switching from their old bank to Key
How It Increases Online Activity
- KeyBank’s S.M.A.R.T system will attract new mass and mass
affluent customers
- However, many customers do not want to deal with the
hassle of switching banks, so they will stay with their
existing bank out of habit
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11. Even More S.M.A.R.T. Technology
ATM Fee Waiver A
• 6 Free Non-KeyBank ATM Withdrawals
KeyBank Sustainability S R
• Personal log-in page with personal green-o-meter
KeyPal A T
• Hassle-free online money transfer
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12. Meet Suzy Spender
• Extremely Tech Savvy
• In a rotational program at a local Fortune 500 company
• Because she travels so much, she uses the ATM
frequently Age: 27
Education:MBA
• Would typically use a large national bank for their Income: 125K
convenience Kids: None
Car: Audi A4
Hobby: Traveling
“I just love how Key looks out for
me, plus all of my friends are jealous of
the cool features Key offers”
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13. Meet Frugal Frank
• Just started text messaging (Kids made him)
• Prefers to send his bills out via mail so he knows they get
paid
• Since he works long hours, if he has questions about his
bank account he typically calls customer service
Age: 41
Education:High School
Income: 50K
“I typically work late, and always miss my bank’s
Kids: 3 customer service hours…Key’s 24/7 chat is perfect
Car: Dodge Ram for me because now I always have someone
Hobby: Muscle Cars
available to answer my banking questions”
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14. Meet the Something Clever Turners
• Small business owners
• Prefer paper statements (security)
• Key staff know Wayne & Lori by name
Parents: Wayne (48) Lori (47) “I was visiting the bank 9 or 10
Education: Graduate Level
Household Income: 160K
times a week to deposit
Kids: 2 checks, now with mobile deposit, I
Cars: Chevy Suburban & Chrysler 300 almost never have to go to the
Hobbies: Their Kids
bank; it’s really changed my life”
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15. Challenges of Increasing Online Banking
Increase in
Substitution Reduction in
Augmentation total
from more short-term
in more costly transaction
costly customer
channels volume &
channels profitability
average costs
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16. Benefits of Online Banking
Higher • Higher Customer
Customer Satisfaction
• Higher Switching Costs R
Retention
Higher • Attracts More
Market Profitable Customers
Shares • Lower Defections M
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17. Profitability: Cost Factors
Online
VRU Channel
0.18 0.09
ATM
0.31
Branch
1
Call Center
0.94
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18. Annual Cost Savings
($mm) Low Mid High
Reduced Branch Costs $49.1 $66.6 $84.0
Reduced Telephone Costs $2.8 $9.8 $16.7
KeyPal Revenues $5.5 $6.3 $7.1
Increased Online Costs ($0.9) ($1.6) ($2.3)
Increased Mobile Deposit Costs ($1.3) ($1.7) ($2.1)
Increased Online Chat Costs ($0.2) ($1.9) ($3.6)
Net Reduction in Costs $55.0 $77.5 $99.9
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19. Financial Analysis
NET PRESENT VALUE
(in thousands of $)
Inputs
Discount Rate 2.7%
Period 0 1 2
Current Investment $ 9,600.0
Future Cash Flows $ (2,599.0) $ 20,253.7
Net Present Value using a Time Line
Period 0 1 2
Cash Flows $ (9,600.0) $ (2,599.0) $ 20,253.7
Present Value of Each Cash Flow $ (9,600.0) $ (2,529.6) $ 19,187.2
Net Present Value $ 7,057.5
Return on Investment (ROI) 84%
*Assumes that 1/3 of substitution benefits begin in two years
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20. Implementation
Year 2010 2011 2012
Qtr 1 2 3 4 1 2 3 4 1 2 3 4
1. Innovation planning
2. Online awareness
campaign (MKT)
3. Technology platform
4. Mobile Applications
5. SMART
6. Sustainability Program
7. Switching Made Easy
8. Other online rewards
program
9. Returns on Investment
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21. Next Steps
• Be S.M.A.R.T. and increase online banking
use by 35% in the next 3 years!
• Please consult with your internal strategy staff
to go over what we have suggested today.
• For our next meeting, please come prepared
to further discuss implementation.
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22. We Are Ready To Answer
• Sustainability Online User Page
• Financial Assumptions
• Online Adopters
• Saving the Planet with Online Banking
• Value of Online Banking
• Online Banking Trends
• Banking Survey
• SWOT Analysis
• Works Cited I
• Works Cited II
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23. Savings to date from
Online Banking:
$15.98

24. Usage: Assumptions
Product Assumptions
Online Usage 35% increase (46mm), 10% for new clients (4.6mm)
Branch 5 online transactions reduces 1 branch transaction
Decrease of 8.4mm branch transactions (less new clients)
KeyPal Comp processing fees @ 10% of revenues
Customer base at 1/20th of Paypal, 2 years after creation (500k)
Mobile Deposits Comps @ 2% customer base
Assuming 2% of transactions @ Key (5.16mm)
Online Chats 5% of online transactions will use chat
Reduces telephone usage by 1/5 of chat (1.78mm)
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25. Online Adopters
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26. Saving the Planet with Online Banking
By using online bill pay and mobile deposit, a person with the
following characteristics:
• 2 trips to ATM/bank per week
• 30 minutes per trip, including travel and transaction time
• 1 mile distance from bank
• 24 mpg city miles
• $2.65/gallon gas
Personally saves the following:
• 8.7 gallons of gas
• 168.1 pounds of greenhouse gas emissions
• 52 hours
• $22.97 on fuel costs
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27. Value of Online Banking
Average yield
Comparison of average minimum
required to open and account
Yield on an online account is
better, 0.69 percent as compared to
0.12 percent at the brick and
mortar.
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28. Online Banking Trends
Active Online Banking Customers at Top Online Banks
Number of Customers (Thousands)
55,000
50,000
45,000
40,000
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29. Banking Survey
KeyBank Bank of America
Online Capabilities 5 9
Mobile Capabilities 3 9
Customer Service 10 9
ATM (Convenience and Functionality) 5 8
Staff Knowledge 10 10
Fees 4 4
Product Variety 5 8
Branch Convenience 6 4
Customers were asked to rate KeyBank and Bank of America on a scale of 1 (low) - 10
(high) on the following factors. Chart shows average score (to nearest whole number).
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30. S.W.O.T. Analysis
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31. Works Cited I
• Campbell, Dennis. Cost Structure, Customer Profitability, and Retention Implications of Self-Service Distribution Channels:
Evidence from Customer Behavior in an Online Banking Channel. Management Science. January 2010: 4-24. Print
• Bruno-Britz, Maria. Online Bankings Next Growth Spurt. Feb 5, 2010
http://www.banktech.com/channels/showArticle.jhtml?articleID=219000127
• Radwanick, Sarah. Number of U.S. Online Banking Customers Continues to Grow Despite Challenging Financial Environment.
ComScore. Apr 21, 2009
http://www.comscore.com/Press_Events/Press_Releases/2009/4/2009_State_of_Online_Banking_Report
• Selvon, Mike. The Future of Online Banking is With Mobile Phones. Feb 5, 2010
http://ezinearticles.com/?The-Future-of-Online-Banking-is-With-Mobile-Phones&id=2626705.
• BS&T Staff. 10 in 2010: Banking Trends for the New Year. Feb 5, 2010
http://www.banktech.com/managemenstrategies/showArticle.jhtml;jsessionid=WNHJTMOALEPEBQE1GHOSKH4ATMY32JV
N?articleID=222002892.
• Wiles, Sam. The top 10 Online Banks. December 18th 2009
http://articles.moneycentral.msn.com/Banking/BetterBanking/TheTop10OnlineBanks.aspx
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32. Works Cited II
• Keynote Staff. “Scorecards for Financial services.” Feb 2010
https://scorecards.keynote.com/viewscorecard.aspx?iid=1&scid=10040&oid=1.
• Keynote Staff. “Consumer Search.” Keynote, May 2009
http://www.consumersearch.com/online-banking/review
• IBISWorld Industry Report: Commercial Banking in the US: 52211 Dec 09, 2009 Copyright 2010, IBISWorld Inc
• 2008 KeyCorp Annual Report www.key.com
• Oja, Erik. Standard & Poor's Industry Surveys: Banking, Regional Banks Analyst. Dec 24, 2009. Standard & Poor's Financial
Services LLC, a sub of The McGraw-Hill Companies, Inc.
• Wolverton, Troy and Kane, Margaret. “PayPal delays IPO.” CNET News. Feb 6, 2002. http://news.cnet.com/PayPal-delays-
IPO/2100-1017_3-830235.html
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