tomorrow’s transactions today

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ICCI Conference, Sofia

Increasing customer relevance for banks

Douwe Lycklama – 24 October 2014

2 Increasing customer relevance for banks. Douwe Lycklama – 24 October 2014. © Innopay BV. All rights reserved.

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Innopay: independent management consultants specialized in digital strategy and transformation

• Founded in 2002

• Partners: Shikko Nijland & Douwe Lycklama

• HQ in Amsterdam, NL

• 17 consultants

• Active in transaction and service oriented sectors throughout EU

• Member of a.o. EBA, ECP/EPN and EPCA

3 Increasing customer relevance for banks. Douwe Lycklama – 24 October 2014. © Innopay BV. All rights reserved.

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Experts in transforming today’s complexity into business opportunities

Business

Technology

Rules & Regulations

4 Increasing customer relevance for banks. Douwe Lycklama – 24 October 2014. © Innopay BV. All rights reserved.

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Customers share their ‘digital attention’ more and more

5 Increasing customer relevance for banks. Douwe Lycklama – 24 October 2014. © Innopay BV. All rights reserved.

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Public and private services in digital transformation

Government

Utilities

Web merchants

The European 2020 initiative promotes cross-border digital transformation E.g. Tuscany goes fully digital, PEPPOL as pan-EU e-procurement

Merchants can use customer intelligence for a customized retail process

Germany’s e-energy network: a new ICT-based "energy marketplace”

Banks Financial services being innovated by non-bank players across the globe

6 Increasing customer relevance for banks. Douwe Lycklama – 24 October 2014. © Innopay BV. All rights reserved.

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Small screen: no ‘conversion killers’ allowed

7 Increasing customer relevance for banks. Douwe Lycklama – 24 October 2014. © Innopay BV. All rights reserved.

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Transactions:

crowded

place?!

8 Increasing customer relevance for banks. Douwe Lycklama – 24 October 2014. © Innopay BV. All rights reserved.

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The foundation of electronic payments …

Bank buyer Bank seller

Seller Buyer

9 Increasing customer relevance for banks. Douwe Lycklama – 24 October 2014. © Innopay BV. All rights reserved.

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Pay platform ‘on top of’ banking infrastructure

Bank buyer Bank seller

Seller Buyer

Pay platform

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PSP adding simplicity

Bank buyer Bank seller

Seller Buyer

Pay platform

PSP

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‘Mobile era is here’

Bank buyer Bank seller

Seller Buyer

Pay platform

PSP

Pay app

Pay app

12 Increasing customer relevance for banks. Douwe Lycklama – 24 October 2014. © Innopay BV. All rights reserved.

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Online platforms: the continents

Bank buyer Bank seller

Seller Buyer

Pay platform

PSP

Online platform

Pay app

Pay app

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Mobile drives usage

Bank buyer Bank seller

Seller Buyer

PSP

Online platform

App

Pay app

Pay platform

Pay app

Pay app

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Ecosystem ‘replicated’

Bank buyer Bank seller

Seller Buyer

PSP

Online platform

App

Pay app

Pay platform

PSP

Pay app

Pay app

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Will new technology push disintermediation?

Bank buyer Bank seller

Seller Buyer

PSP

Online platform

App

Pay app

Pay platform

PSP

Pay app

Pay app

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Processor landscape disruption?

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Banks have a hard time keeping up with the pace

18 Increasing customer relevance for banks. Douwe Lycklama – 24 October 2014. © Innopay BV. All rights reserved.

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PSD2 is asking more from banks

In time & real time More & more; never enough

Easier

19 Increasing customer relevance for banks. Douwe Lycklama – 24 October 2014. © Innopay BV. All rights reserved.

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... and redefine the acquiring domain in the payment value chain ?

Source: Innopay analysis

New XS2A model: entry of TPPs

Browser Webshop

Routing Service

Cre

dit

or

acc

ou

nt

Scheme & Directory Sc

he

me

Messaging (in scope)

Regulated domain

Cre

dit

or

acc

ou

nt

‘Standardized API’

Deb

tor

acc

ou

nt

Debtor Creditor

‘TPP’ Online pymt provider

Account servicing

PSP

Acquiring PSP

Traditional 4 corner model

Browser Webshop

Online Banking Routing Service

Deb

tor

acc

ou

nt

Cre

dit

or

acc

ou

nt

Scheme & Directory

Messaging (in scope)

Traditional scheme

Secure messaging

Account servicing

PSP

Acquiring PSP

Creditor Debtor

Sch

em

e

Online pymt provider

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Half full vs half empty

2014 20XX

Resistance is futile; take a venturous approach

Growing transaction market for both payment & non payment

transactions

A bright customer’s perspective

21 Increasing customer relevance for banks. Douwe Lycklama – 24 October 2014. © Innopay BV. All rights reserved.

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Do not waste a good regulation

“Never let a good crisis go to waste”

-Sir Winston L.S. Churchill

regulation

22 Increasing customer relevance for banks. Douwe Lycklama – 24 October 2014. © Innopay BV. All rights reserved.

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Banks traditionally focus on transactions... ...but there’s more to gain at the ‘check in’

Today’s focus

Orientation Selection Delivery Customer Care Transaction

Check in

Tomorrow’s opportunity

eID

nex

t re

ven

ue

dri

ver

• More transactions • Banks’ opportunity

to be(come) relevant

23 Increasing customer relevance for banks. Douwe Lycklama – 24 October 2014. © Innopay BV. All rights reserved.

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… it’s already happening

Being part of another party’s process is all about

1. Check-in 2. Convenience 3. Security

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The API economy is normalizing

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Digital Identity: banks are well positioned

Trust of the consumer

Have invested in infrastructure

KYC

(Looked in the eyes first)

26 Increasing customer relevance for banks. Douwe Lycklama – 24 October 2014. © Innopay BV. All rights reserved.

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Digital identity:

the mother of all

transactions?!

27 Increasing customer relevance for banks. Douwe Lycklama – 24 October 2014. © Innopay BV. All rights reserved.

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What can banks offer with Digital Identity

Trust Compliance Convenience

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Increasing relevance for both payers and payees

ProvenbusinessmodelinTheNordicswheregoverment&businessesareunitedbybanks

Buyer Seller

Similarbusinessmodelasinternetpaymentproviders(Trxfee€0.10-0.15)

Issuer Acquirer

29 Increasing customer relevance for banks. Douwe Lycklama – 24 October 2014. © Innopay BV. All rights reserved.

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30 Increasing customer relevance for banks. Douwe Lycklama – 24 October 2014. © Innopay BV. All rights reserved.

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# A

uth

enti

cate

d t

ran

sact

ion

s

2014 2020

Non-payments

Payments

Market for ‘other’ transactions booming: • Personal data • Contracting • Sign up • Login

Market for payment transactions stable

Private

Government

Identity transaction-market about to explode

Private sector will drive numbers, government catalyzes

31 Increasing customer relevance for banks. Douwe Lycklama – 24 October 2014. © Innopay BV. All rights reserved.

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The land rush for relevance is happening nów… …and banks are not the only providers

32 Increasing customer relevance for banks. Douwe Lycklama – 24 October 2014. © Innopay BV. All rights reserved.

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Banks are not alone in the Digital Identity space Banks: customer ownership, trusted relation, strong credentials,

Telco’s: customer ownership, access to trusted device

Social media: lots of data on consumers ‘Omnipresent’

Identity specialists: technology, B2B relations

Postal services: leveraging physical network, brand

Merchants: customer knowledge, brand, shopping experience

33 Increasing customer relevance for banks. Douwe Lycklama – 24 October 2014. © Innopay BV. All rights reserved.

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Five tweet summary .... (instead of Haiku)

1. Banks have increasing competition for #customer #attention and trust

2. #Banks reintermediate into customer’s daily lives

3. Newcomers and regulators press for #payment innovation #psd2

4. Never waste a good regulation: banking sector enters the #APIeconomy #psd2

5. #Digital #Identity = the new money: from product centric to customer centric #relevance up! @dgwbirch

tomorrow’s transactions today

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Douwe Lycklama, douwe@innopay.com, +31 655 711 150