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transcript
Global-Trends-Digital-Banking-BU Banking Lecture-19Sep14_v2.pptx 1
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Key messages
Digital channels within banks have grown continuously and significantly – outpacing all
other channels and changing the traditional sources of competitive advantage for banks
Banks around the world have experimented with different Digital service models since the
late 90's – but no clear winning model with a broad product offering has emerged
However, as Digital continues to grow and evolve, recent observations indicate that broader
offering Digital banks are showing promising signs of future success
As Traditional Banks move to capitalize on Digital trend, it's critical to align on specific
strategic vision and objectives, core value proposition and operating model before acting
Global-Trends-Digital-Banking-BU Banking Lecture-19Sep14_v2.pptx 2
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Agenda
Share perspectives on the Digital banking landscape
Review a Digital banking case study
Global-Trends-Digital-Banking-BU Banking Lecture-19Sep14_v2.pptx 3
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Digital channels gaining momentum, outpacing Traditional Global snapshot of channel mix
Source: BCG estimates on BCG cases material (cross-section of major banks across geography
Service & transactions Sales & advice
0
1,000
2,000
3,000
4,000
Service contacts p.y. (100 index)
Branch
CC
ATM
2020
~ 3,700 (+40%)
4% 1%
29%
26%
40%
2012
~ 2,700
28%
1% 15%
6%
49%
Mobile
Internet Online
channels
~ 66% in 2020
On a 100 sales & advice contacts basis
0
20
40
60
80
100
120
Sales & advice contacts p.y. (100 index)
Branch
Mobile RM
CC
Mobile
Internet
2020
113 (+13%)
47%
11%
5%
14%
23%
2012
100
79%
5%
15%
Frontline
personal
contact
channels
~ 60% in 2020
Online
channels
~ 40% in
2020
Global-Trends-Digital-Banking-BU Banking Lecture-19Sep14_v2.pptx 4
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Consumer expectations are also massively shifting to digital EU snapshot of consumer expectations
1. Includes Internet, ATM and mobile; Note: Current: 2010, Future: 2015 Expected; European market; Source: EFMA online survey across 150+ European banks
77
78
80
73
7
11
8
4
4
6
9
16
11
4
12
84
5
4
Mortgages
Investments
Savings
Accounts 2
Current
Accounts 3
Consumer
Finance
Products
38
58
72
32
11
13
13
3
5
8
43
58
28
10
47
53
3
3
1
1
Direct channels1 Call centre Agents/Brokers Branches
Current sales still driven by branches...
... but consumers already expect
dominant channel to shift in near-future
Current sales breakdown by channel (2010 % of sales) Expected dominant channel in 5 years (% of respondents)
Global-Trends-Digital-Banking-BU Banking Lecture-19Sep14_v2.pptx 5
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Many 'myths' to dispel about Digital Banking
Reality #3: New players, until now, typically focus on non-traditional products, with opportunities for banks to participate (and expand their offerings)
Reality #6: The challenge is to ensure customer data is consistent, coherent, and at the frontlines to drive more productive conversations
Reality #5: Products portfolio need to be aligned across the bank to avoid cannibalization. Also, complex traditional products online may result in a poor customer experience
Reality #2: There are natural cross-channel customer journeys which should be enabled. Attempts to enable all possible cross-channel journeys drives complexity and cost
Reality #1: The need for branch-based advisory services will continue to remain important. Digital frees up branch staff to focus on advisory sales
Myth #1: The Branch is dead
Myth #5: All traditional products
need to be available online
Myth #2: Customers want an
omni-channel experience
Myth #3: Traditional banks
attacked by new digital players
Myth #4: Banks must become like
Facebook or perish
Myth #6: Digital banking requires
Big Data
Reality #4: Most social media initiatives have disappointed. Banks must harness the power of social media to drive customer reviews and build customer advocacy
Digital banking Myths Digital Banking realities
Global-Trends-Digital-Banking-BU Banking Lecture-19Sep14_v2.pptx 6
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To date, three waves of digital banking trends Successful direct models have been "surgical"– focused on narrow offerings and segments
Product specialist
1
"Universal"
Digital Bank
2
Customer segment
specialist
3
1995 2000 2005 2010 2014
?
?
Too early
to assess
Pure niche player 4
1990s: Universal bank 2000s: Specialists Current: New wave
?
?
Too early
to assess
Global-Trends-Digital-Banking-BU Banking Lecture-19Sep14_v2.pptx 10
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Objectives & Vision: Few potential paths banks may pursue
Offense
Defense
Low cost
channel
migration
Attract new high-value customers with rich services Acquire High-value
customers
Acquire Mass customers
"Occupy the land"
Retain existing clients
Migrate to low-cost channel
1
2
3
4
5
Attract broad / Mass customers with simple direct offer
Build capabilities and take position to fend off new entrant
Provide customers "counter-offers" to competitive offers
Design separate channel to lower cost position
Actively push low-value customers to lower cost channels
Many factors impact choice of strategic objectives, e.g.,
market share, brand, cost position, competitive landscape
Global-Trends-Digital-Banking-BU Banking Lecture-19Sep14_v2.pptx 11
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Agenda
Share perspectives on the Digital banking landscape
Review a Digital banking case study
Global-Trends-Digital-Banking-BU Banking Lecture-19Sep14_v2.pptx 12
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Case study: mBank is the biggest Polish online bank
and part of third largest Polish bank, BRE Bank
• The third Polish banking group with
comprehensive financial offer tailored to the needs
of corporate clients, Private Banking clients, and
retail clients
• Member of Commerzbank Group
• ~6,000 employees
• BRE Retail banking (mBank, MultiBank, mBank
Czech Rep. & Slovakia) serves total 4.1 million
customers
• First Polish pure-play online bank founded in 2000
• Currently #3 retail bank and the biggest online bank
• Full retail and SME product range available behind
single login
• Launched in Czech Republic and Slovakia in 2007
• $10.2 billion deposits & $11.4 billion loans at the end of
2012
Business results [2012 EOY, USD in million] Results by country (2012 EOY, USD in million)
0
20,000
10,000 10,514
Deposits Loans
11,573
400
200
0
374
Net Income
Source: BRE Bank Investor Relations, Bankier.pl
• 3.5 Mn customers
• $8,800 Mn deposits
• $10,900 Mn loans
• 0.17 Mn customers
• $439 Mn deposits
• $88 Mn loans
• 0.44 Mn customers
• $923 Mn deposits
• $458 Mn loans
Global-Trends-Digital-Banking-BU Banking Lecture-19Sep14_v2.pptx 13
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Case study: mBank heritage was pure Digital bank
Key capabilities and
design choices Overview of mBank design
Customer value
management
• Universal products and
services
• Focused on key customer
needs
Distribution
• Channels work together in
concert
• Customer service guided
to Digital channels
Operations
• Modeled after ING Direct
model
• Designed for low-cost
• Today's mBank "close to a
start-up"
Convenience Low-cost
Free ATMs, free concierge
service
Range of free-tools online,
including payments, budget
tools, analysis
24/7 video service
High functionality and social
media integration
Global-Trends-Digital-Banking-BU Banking Lecture-19Sep14_v2.pptx 14
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Case Study: mBank changed the "rules of the game" Successful in beating the "s curve" - low cost deposit share significantly higher than branch share
Retail deposits Current (Checking) Accounts
22
8
6
4
2
0
16 6 4 2 0
CITI BPH
BGZ
KREDYT BANK
MILLENNIUM
BZWBK
mBank
ING
Branch share (%)
PKO
Retail deposits share (%)
PEKAO
Total asset
PLN 50 Bn
20
8
6
4
2
2 0 4 6 16
0
C/As share (%)
CITI BPH
BGZ
MILLENNIUM
Branch share (%)
BZWBK mBank
ING
PEKAO PKO
No of C/As
2 500 th
45% line for
proportional share
45% line for
proportional share
Global-Trends-Digital-Banking-BU Banking Lecture-19Sep14_v2.pptx 15
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Case Study: mBank success based on few key factors
Well defined, attractive
target segment
Consistent, differentiated
positioning and marketing
Broad (like traditional bank)
offer & ALWAYS better deal
Best-in-class "feel & look"
transactional (core)
banking products
Key success factors Description
• Focused in segment selection; did not try to pursue all segments
• ~20-35 years, students - High potential: modern, educated, open for novelty
• (Such) customers grow in professional life/ wealth – currently mBank with
probably the most attractive, mass affluent customer base
• Distancing from "traditional banks" (like Apple vs IBM)
• "Do not pay for "bricks" of traditional banks, get better offer"
• "Why to pay for no choice of investments – get all funds at no fees"
• By leveraging scale/ power on suppliers (funds, insurance), analytical
advantage (one-to-one pricing), process convenience (loans)
• Often beyond banking e.g. insurance, experimented MVNO, etc.
• Creates very high recommendation levels/ NPS
• Believe: Customer transact daily (getting loans occasionally) - this is how
they build satisfaction, advocacy and stickiness
• Transactions as great source of Information and Touch points allowing best
offer (e.g. preapprovals, discounts, real time/ relevant offer)