The document discusses emerging digital banking trends and identifies leading practices. It highlights that digital capabilities are putting customers at the center and increasing their expectations around managing their finances simply across all channels. Banks need to deploy digital capabilities to deliver seamless, integrated experiences at speed to meet these expectations or risk losing customers to more nimble competitors focusing on customer experience. Mobile, social media, analytics and the cloud will drive significant changes in banking models and capabilities.

1. Digital Banking Excellence
Lloyds Banking Group
« Digital Market Insights »
START
May 2012

2. OBJECTIVES OF THIS DOCUMENT
1
 HIGHLIGHT EMERGING DIGITAL BANKING TRENDS IN RETAIL AND
COMMERCIAL BANKING
 IDENTIFY LEADING DIGITAL BUSINESS PRACTICES
2
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3. Exec Summary Digital Trends Conclusions Contacts Appendix
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4. Customer Expectation vs Business Value in 2013 for a mature bank
2 Simplicity 1 M-Wallet Legend
Dashboard 1. High investment
3 Security 1 4 E-commerce
&Savings
High
2. Medium Investment
Customer Mobile as primary
11 Tech Innovation 10 6
empowerment contact 1. Low investment
CUSTOMER’S EXPECTATION’S
Knowledgeable
18Bank everywhere 5 Contextual
Cloud about me 9 2. Reuse
Better service: environment
28 17 Media Center 3. Quick-Win
apps – open API
Exec Summary 15 Digital
5
Social Media 4 M-Payments
capabilities benchmarking
Medium
Redefine branches Micro-management
14 1 Capgemini Consulting
models journey
Analysis – Mai 2012
7 Tablets 6 Geolocation
Knowledgeable self Each number refer to
14 10 Gamification
service kiosks - ATM hypothesis of the
document
2
Single view of the 12Digital platform
Key Trends customer
13Speed to deliver
Low
Conclusions
Contacts
Less Medium High
Appendix
EXPECTED BUSINESS VALUE

5. Summary Customer Insights New Services Competitors New Models New Technology Payments Commercial Enablers
Digitization has increased customer expectations and the availability of new services
DIGITAL
NEW DIGITAL
THE CUSTOMER CAPABILITIES
SERVICES, FROM CONSUMER DIGITAL
IS NOW AT THE THE BULK OF ARE BEING MOBILE, SOCIA
WITHIN AND PAYMENTS WILL CREATES NEW
CENTRE OF THE INNOVATION IS DEPLOYED TO L MEDIA, AND
OUTSIDE BE A KEY REVENUE
BANKING HUB, COMING FROM DELIVER STP ANALYTICS ARE
BANKING HAVE BATTLEGROUND OPPORTUNITIES
ENABLED BY EMERGING AT SPEED AND GAME
INCREASED FOR CUSTOMER IN COMMERCIAL
DIGITAL COMPETITORS SEAMLESS CHANGERS
CUSTOMER INSIGHT AND BANKING
CAPABILITIES CHANNEL
EXPECTATIONS LOYALTY
INTEGRATION
Delivering this Customers The traditional Banks need to The next wave of Banks will need to At a basic
customer have very high structure of understand the financial services create the means level, building on
Key Trends centricity expectations banks tends to changing nature innovation will be to ensure they the key
requires banks driven by their inhibit the pace of the channels enabled by support mobile functionality
to radically day to day of innovation and the technologies that payments, either provided for retail
revaluate how digital implications of can deliver richer through direct customers, such
they structure experiences. If emerging digital experiences at focus or as single sign
and arrange banks cannot capabilities on lower cost partnership on, PFM, etc, addr
themselves deliver they their cost base esses a key need
will go
elsewhere
Exec Summary TO LEAD OR BE A FAST FOLLOWER, BANKS REQUIRE WORLD CLASS INNOVATION AND DELIVERY CAPABILITIES
Legacy systems and structures will hinder this, but banks need to create the ability to innovate and deliver and digital speeds in their focus areas
(e.g. service, payments, etc)
Conclusions
Contacts
DIGITAL WILL DRIVE THE CHANGE AGENDA FOR BANKS
Appendix (WHETHER THEY LIKE IT OR NOT)

6. Summary Customer Insights New Services Competitors New Models New Technology Payments Commercial Enablers
THE CUSTOMER IS NOW AT THE CENTRE OF THE BANKING HUB, ENABLED BY DIGITAL CAPABILITIES
KEY TRENDS - HYPOTHESIS IMPLICATIONS PROOF POINTS
• Customers will dictate how they want to About 26% of US online adults use a
I want to manage my money, interact with their money financial advisor. Just 29% of Europeans
1 my way • Visibility across all financial holdings, believed their bank puts them first -
regardless of provider, will be valued Banks to take note as Customer Advocacy
impacts revenue- Forrester
57% of customers required a better service
Key Trends across channels. Mobile is today the best
channel to increase customer satisfaction
(Apple, Tesco) – WRBR12 – Capgemini
I want a simple, seamless and • Provide simplicity: single sign-on for all More than 50% of iPhone users have
2 personalized experience device/site, simple search, consistent ID&V
• Develop single view of your customer
used mobile banking in past 30 days and
across all interactions 33% of mobile banking users monitor
accounts daily, 80% weekly (Javelin
Strategy)
69% of consumer in Europe are worried
Exec Summary I want flexible, secure access • Ensure security of transactions especially about privacy and 66% believe their is an
3 to my money at any time Mobile, Tablets and Online
• Investigate morphing solutions for avatars
risk to increase fraud. However 87% of UK
consumer see m-payment as more
convenient, speed and easier - Mashable
Conclusions
Pace of change is accelerating, with consistently increasing customer expectations
Contacts
Appendix

7. Summary Customer Insights New Services Competitors New Models New Technology Payments Commercial Enablers
NEW SERVICES, FROM WITHIN AND OUTSIDE BANKING HAVE INCREASED CUSTOMER EXPECTATIONS
KEY TRENDS - HYPOTHESIS IMPLICATIONS PROOF POINTS
• Examine and rebalance your channel strategy. Yankee Group (June 2011) predicts that
Electronic payments and m- there will be 500 million m-banking users
Note that branches still have a role to play
globally by 2015.
4 commerce will become the • Address the digital business as a revenue
M-commerce is estimated at 31 b$ by 2015 in
primary payment channel generator, and how that will impact the
US – eMarketer
business
Social media is a key customer 89% of people have yet to buy anything on
• Integrate social media into your innovation and
Key Trends interaction and insight
prototyping processes
Facebook – Havas Media
5 channel, and will gain in • Use social media and analytics to generate By 2012, 40% of financial services firms
importance in financial predicators of trends, needs and issues
expect to invest 5% in average of their
services marketing budget in Social media - Forrester
• The mobile will be the primary relationship One out of three American consumers to use
hub, around which interactions will be co- their mobile phone to access their bank
Mobile will be the primary account, credit card, or other financial account
ordinated for the majority of customers
6 interaction channel by 2014 • Geolocation is an opportunity
by 2013 – Federal reserve survey
• Relationship manager will be an app building Barclays: online banking customers make 6
transactions a week, mobile banking
on technologies such as Siri
customers make 10. #mse11 - Twitter
Exec Summary
There were more tablets purchased than
• Tablets are replacing PC’s at home PC’s in 2011. However only 20% of
Tablets are becoming the
Conclusions 7 home-life management tool • They are expected to be integrated with the
client environment leveraging opportunities
websites are optimized for tablets
Today it’s mainly focus on advertising
22%, with cannibalizing practices – REC+
Contacts Customers are expecting to manage their own money across all holdings, through their increased
experience and acceptance of supported self service
Appendix

8. Summary Customer Insights New Services Competitors New Models New Technology Payments Commercial Enablers
THE BULK OF INNOVATION IS COMING FROM EMERGING COMPETITORS
KEY TRENDS - HYPOTHESIS IMPLICATIONS PROOF POINTS
End to end model bank in the future will represent
Emerging competitors are more • New technologies and entrants will be faster 5.5% versus 22.8% today. 14.1% will be
and more nimble distribution driven, 11,4% product driven and
8 fleet of foot, due to their lack • There is an opportunity to partner with or buy 14.6% utilities. 44.7% have not the capabilities to
of old infrastructure new offerings with small organisations transform. Other are mix – Capgemini Analysis
WRBR12
Apple is becoming bigger than Google and
Key Trends • Create a unified platform to manage the client Microsoft combined in 2012
Apple, Google and Facebook Facebook make their introduction with high
data based on internal/external actions
9 control information access and • Creation of a datamart/analytic team on growth perspectives by 2015
management business side 10% of people would consider Apple as a bank.
43% of Apple’s customers - Websources
New competitors are Evolving from traditional/online banking; m-
focusing on customer • They can afford to be fast and nimble
10 experience, however do not • However, they do not have the level of trust
that the main players have
banking will attract 115 million users in Europe
and 86 million users in North America, by
have the same trust 2015.- Berg Insight:
Exec Summary
8 out of the 15 major banks in the world signed
Banks are creating • There is a consistent trend for leaders to a partnership BBVA with Google, Citi with IBM
Conclusions 11 partnerships with new partner with a tech firm in digital (city, bbva) or Watson, Google and visa, BNP Paribas with
Orange to leapfrog competitors – Capgemini
entrants such as Google operators. Not doing all in-house.
Analysis
Contacts
Universal banks need to examine partnership opportunities should be explored with
innovative players
Appendix Source: Capgemini Consulting-MIT Analysis – Digital Transformation: A romap for billion-dollar organizations (c) 2011
(1)Bank 2.0, Brett King
(2) London-based consulting firm, KAE
(3) Capgemini World Retail banking report 2012
Simple Bank website

9. Summary Customer Insights New Services Competitors New Models New Technology Payments Commercial Enablers
DIGITAL CAPABILITIES ARE BEING DEPLOYED TO DELIVER STP AT SPEED AND SEAMLESS
CHANNEL INTEGRATION
KEY TRENDS - HYPOTHESIS IMPLICATIONS PROOF POINTS
More than 40% of firms as build an optimize digital
Digital platforms will provide • The digital platform must support platform in 2010. vs 29% in 2007. Firms with an
12 the integration platform across SOA, enabling modular growth and where overarching vision of digital have a financial
performance 20% above their industries' average
channels required contraction
– MIT CISR 2011
In the Capgemini Consulting MIT
Key Trends Speed of innovation and • Due to the resources required, you will not be survey, companies are rating the pace of
able to lead in all areas. Determine the focus
13 delivery needs to reflect other • Create a lean, optimised innovation and
change at 5.6 out of 7, with the same
acceleration 5 years later. They rated their
digital businesses – fast! delivery engine innovation capabilities at 4.7 out of 7, Current
time to implement an idea from crowdsourcing
innovation is 9 month on average - American
banker
Branch transformation is • Customers prefer online for routine activities It’s estimated that branch networks account for
• Design your new-intermediation strategy about 60% to 75% of banks retail banking cost
14 required to maintain • Take lessons learn from retail (apple) base. Apple stores are the most valuable retail
their value to the business • Develop different type of point of sales chain in the U.S. Capgemini Analysis
Exec Summary
Digital capabilities will • Digital will enable a utility approach by More than 60% of banks believe that new
Conclusions
15 accelerate changes in the supporting virtual supply chains (e.g. capabilities will be crucial to success in
banking operating model aggregators, etc) mobile, however they are not yet investing
accordingly – EMEA/McKinsey
Contacts
The digital channel has the potential to become a higher revenue channel than branches
Appendix

10. Summary Customer Insights New Services Competitors New Models New Technology Payments Commercial Enablers
MOBILE, SOCIAL MEDIA, AND ANALYTICS ARE GAME CHANGERS
KEY TRENDS - HYPOTHESIS IMPLICATIONS PROOF POINTS
One out of three American consumers to use their
Mobile is set to be the • Development of leading mobile banking mobile phone to access their bank account, credit
card, or other financial account by 2013 – Federal
16 primary interaction and solutions, with a focus on ease of use and
reserve survey
payment channel putting control to the customer
Barclays: online banking customers make 6
• Development of flexible payment solutions
transactions a week, mobile banking customers
make 10. #mse11 - Twitter
Key Trends Social media, including In 2012, more than 70% of banking transactions
• Provide better service to customers
Skype, will be the preferred
17 channel for customer
(responsiveness, proximity, customization)
• Expedite / optimize claims processing
will be done at the self-service channels-Novantas
57% of customers required a better service across
service • Reduce customer service costs channels – Capgemini – WRBR12
Companies can lower the cost of their customer
Cloud solutions will enable • Examine the use of cloud solutions to
service infrastructure by up to 43% over a five-
accelerate innovation and prototyping
18 rapid prototyping and go to • Review pricing structures and cost to year period by choosing cloud-based customer
market deliver, as new players will have less
care tools rather than on-premise options. Frost &
Sullivan’s
Exec Summary overheard
• Incentivise customers to use your payment In 2009, the McKinsey Global Institute estimated
Owning the customer solutions, or the data will be available to that U.S. banks and capital markets firms
Conclusions
19 transaction data is key others collectively had more than 1 exabyte--or one
quintillion bytes--of stored data. It’s a core
• Provide meaningful, personalised location
strategic asset and digital enabler. 22% of
based marketing based on the data financial organizations are in partnerships on a
Geolocation projects in 2012
Contacts
These solutions put the customer in control of their money, anytime anywhere, while also
providing two way communications support with their financial providers
Appendix Source: Capgemini Consulting-MIT Analysis – Digital Transformation: A roadmap for billion-dollar organizations (c) 2011
Capgemini-Consulting benchamark across 137 companies cross-industries (c) 2011

11. Summary Customer Insights New Services Competitors New Models New Technology Payments Commercial Enablers
DIGITAL CONSUMER PAYMENTS WILL BE A KEY BATTLEGROUND FOR CUSTOMER INSIGHT
AND LOYALTY
KEY TRENDS - HYPOTHESIS IMPLICATIONS PROOF POINTS
Mobile payments set to reach £591 billion by
• Competitive mobile / digital payment offerings 2015 – KPMG
Digital payments will become are required to support the customer
The data also shows that 21 percent of
20 a primary day to day payment
•
relationship
retailers already view m-payment capability
method Examine potential partnerships with new
as important enough to be their ‘main activity
innovative players
or, at least, a key enabler’.
Key Trends
Customers need to be • Vouchers and location based marketing are Only 29% of the customer welcome the day
required that mosts payments are done by mobile
21 incentivised to use digital • Provide loyalty rewards for digital phone. Mashable
payments payments, particularly mobile
• Banks are trusted with finance, more so than 69% of consumer in Europe are worried
Security needs to be assured the new entrants about privacy and 66% believe their is an
22 – and banks are in prime • Educate customers as to the security of mobile risk to increase fraud. However 87% of UK
position for this payments, specifically with the rise of mobile consumer see m-payment as more
wallets convenient, speed and easier - Mashable
Exec Summary
End to end model bank in the future will
represent 5.5% versus 22.8% today. 14.1%
There is no clear end model – • Define modular solutions that can be used
23 but you can’t wait now, and can be aligned to the eventual model
will be distribution driven, 11,4% product
driven and 14.6% utilities. 44.7% have not
Conclusions the capabilities to transform. Other are mix –
Capgemini Analysis WRBR12
Contacts
New entrants are specifically targeting the capture and ownership of customer data, while existing
players such as Apple and Amazon have untapped potential
Appendix

12. Summary Customer Insights New Services Competitors New Models New Technology Payments Commercial Enablers
DIGITAL CREATES NEW REVENUE OPPORTUNITIES IN COMMERCIAL BANKING
KEY TRENDS - HYPOTHESIS IMPLICATIONS PROOF POINTS
Commercial customers are • Focus on addressing identified customer 57% of commercial customers would be
needs willing to pay increased fees for a better web
24 willing to pay for digital • Create appropriate pricing models portal. IBM Survey 2011
capabilities
49 % of businesses are willing to pay for the
convenience of mobile cash management
Basic SME services are similar • Build on existing capabilities where possible capabilities, pointing toward the ability for
Key Trends
25 to those of the retail • Create a single sign on for customers banks to generate fee-based revenues to
customer cover some of the cost associated with this
kind of technology investment –Aite/Funtech
2011
55 percent of treasurers expressed interest in
performing more advanced functions such as
Mobile banking will be key • Create SME mobile banking capabilities approving transactions and initiating
26 for SMEs • Link the services with analytics and insight
(dashboards etc)
payments via a mobile device.
The number of m-payments transactions
totaled 4.6 billion in 2010, and is
expected to grow 48.8% per year through
Exec Summary 2013 to 15.3 billion$.
Enabling SME’s to manage Square payments is expecting to reach
their own money on a day • Provision of analytical solutions for SME’s 5b$, including analytics dashboard for
Conclusions 27 to day basis, with the RM • Changing role of the RM to an increased
‘support’ and advisory role for the SME
merchants - Techccrunch
Currently 55% of RM are focusing on a single
providing advice product sale and 45% are not aligned with
the banking strategy – CCI April 2012
Contacts
As the digital services provided in retail grow exponentially, so too will the expectations from
commercial banking
Appendix

13. Summary Customer Insights New Services Competitors New Models New Technology Payments Commercial Enablers
TO LEAD OR BE A FAST FOLLOWER, BANKS REQUIRE WORLD CLASS INNOVATION AND
DELIVERY CAPABILITIES
KEY TRENDS - HYPOTHESIS IMPLICATIONS PROOF POINTS
• Speed of innovation is difficult for the main 8 out of the 15 major banks in the world
Banks are partnering with banks due to legacy solutions and structures.
signed a partnership BBVA with Google, Citi
New approaches are required
28 innovation leaders to • There is a consistent trend for leaders to
with IBM Watson, Google and visa, BNP
accelerate their own capabilities partner with a tech firm in digital (city, bbva) or
Paribas with Orange to leapfrog competitors
– Capgemini Analysis
Key Trends operators
End to end model bank in the future will
represent 5.5% versus 22.8% today. 14.1% will
Banks are focusing on being • Focus on products and services that deliver be distribution driven, 11,4% product driven and
your strategy
29 leaders in key areas – and • Being a fast follower requires leading
14.6% utilities. 44.7% have not the capabilities
to transform. Other are mix – Capgemini
fast followers in others innovation and delivery capabilities
Analysis WRBR12
Exec Summary
• Internal governance and software development Only 17% of the traditional large organizations
Conclusions Digital delivery timescales are
solutions do not lend themselves to digital are succeeding in their digital transformation
being sought (e.g. fast!), but delivery journey – Capgemini Consulting- MIT Survey
30 are being hampered by existing • An integrated governance structure, across all
structures products, channels and services is requried
Contacts
Appendix

14. CONCLUSIONS
Task force focus4
Innovation & Task force focus 1
2 Simplicity 1 M-Wallet
Capabilities Mobile, Online &
Expected 1
Dashboard
4 E-commerce
Tablets
3 Security &Savings
High
Impacts: Expected impacts:
Leapfrog Customer Mobile as primary Increase customer
11 Tech Innovation 10 6
empowerment contact
CUSTOMER’S EXPECTATION’S
competitors with experience
Knowledgeable
partnerships 18Bank everywhere 5 Contextual Retention and
Cloud about me 9
Understanding Better service: environment reward on
28 17 Media Center
the changing apps – open API customer loyalty
Conclusions nature of 5
Social Media 4 M-Payments Compete on M-
channels benchmarking payments market
Understand cost Medium Redefine branches
14 6 Geolocation
base models
1
Micro-management
7 Tablets journey Task force focus 2
3 Customer Exp &
Knowledgeable self 10 Gamification
Task Force focus 14
service kiosks - ATM Analytics
Social Media capabilities
Expected Single view of the Expected impacts:
2 12Digital platform
Exec Summary Impacts customer Delivering customer
Move 13Speed to deliver
centricity
transaction from Drive top line sales
Low
Key Trends physical to digital growth by predictive
network to offer
reduce costs Delivering
Switch call personalized
Contacts
centres to media High experience
Less Medium
centres
Apprendix
EXPECTED BUSINESS VALUE