Digital financial services

DigitALLor nothing

Contents

Introduction 3

The importance of ‘digital outside’ The customer perspective 5Bridging the gapHybrid ITDo more with data

The impact of ‘digital inside’ The employee perspective 11Supporting sales and service Value what you have already Changing times for IT

"Research now proves what progressive companies have come to realise: that the new business environment demands new business models which can successfully integrate internal and external digital services." Mike Sewart, Director of Digital Services, Fujitsu UK & Ireland

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The UK population are digital trailblazers. We spend more time using technology than sleeping1. In 2014, thirty-six million of us went online every day and almost seven in ten accessed the internet on the move.2

Digital is an unstoppable force that is redefining the financial services sector. Those institutions that know instantly what their customers and employees want can stay one step ahead of slower competitors. Thinking about digital strategically and working with partners that can deliver innovation will be key factors in long-term success.

Leading the chargeAccording to a recent Fujitsu study3, the financial services sector as a whole outperforms other industries, achieving the highest levels of usage and satisfaction with digital services. This is perhaps unsurprising given the number of digital services on offer in Retail Banking, for example. But it's not just Retail Banking, it's Pensions, Insurance & Wealth Management that are starting to make progress too.

This focus is highlighted by the National Institute of Economic and Social Research (NIESR) that suggests that there are currently over 270,000 ‘digital’ companies in the UK, representing almost 15% of the UK economy. This shows that all types of financial services providers have a wealth of national talent and digital startups to draw innovation and fresh thinking from.

But what does this surge in digital mean for financial services companies? What can banks and other financial institutions learn from their customers, employees and start-ups? And why is it imperative that companies utilise digital right across the value chain – from front-end customer services to back-end processes and staff engagement?

The insight on the pages that follow explore these digital issues in turn. They demonstrate the impact that digital can have on your operations and show you how Fujitsu is helping organisations like yours become digital inside and out.

1. http://stakeholders.ofcom.org.uk/market-data-research/market-data/communications-market-reports/cmr14/market-context/?pageNum=62. http://www.ons.gov.uk/ons/dcp171778_373584.pdf 3. Digital Inside Out: Creating a digital-first Britain, Fujitsu, 2015

The UK values digital financial services

BANK

In 2012, the UK was the world’s third largest market for app usage, trailing only the USA and China.

Two-thirds of survey respondents use online banking, the biggest number and ahead of online shopping.

63% of consumers say online banking is their most valued digital service – ranked joint top with online shopping.

40% of respondents say they always opt for digital when dealing with their bank/financial institution, the highest response across any industry category.

UK

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Barclays

is using ground-breaking technology to implement its Community Banking service – virtual branches set up in more convenient locations, like libraries or village halls. Its ‘Community Bankers’ can swiftly set up a remote branch wherever suits their customers, using just an iPad and WiFi or 3G connectivity. The result is ‘branch services’ that can be made available almost anywhere and at any time to better serve the needs of Barclays' customers.

The importance of ‘digital outside’The customer perspective

From mobile investment apps and payment transfers to self-service terminals in branches, there are any number of ways for consumers to interact with financial institutions. But what does digital mean to your customers and how can you meet rising expectations?

Inspired by the speed and ease inherent in the digital approach, the UK’s consumers are taking control of their interactions with companies and dictating the pace of those engagements.

This presents financial services providers with a standout digital imperative: how to provide digital services that can match customer expectations and then improve those services as expectations rise.

Financial services providers need to balance the drive for innovation with the need for business continuity. They need to not only enable the digital front-end experience but also connect this to the operational back-end – achieving true end-to-end enablement, that's both effective and robust.

Bridging the gap between physical and virtual worldsIn Retail Banking, the branch-based business model remains important even as digital provides an attractive alternative distribution channel. Therefore, this could increase costs unless the organisation can streamline established channels at the same time as it launches new ones.

The UK is becoming a ‘digital-first’ nation, with more than a quarter of us always using any kind of digital service when given the chance.

Mobile WalletsThe transformation of payments is being redefined by non-traditional providers across the globe. Mobile wallets have been introduced to offer an alternative payment method with the likes of Apple Pay, PayPal and Android Pay becoming trusted and often the preferred method for customers.

9 in 10 UK adults are confident or highly confident in using digital services.

82% of UK financial services customers are happy or exceptionally happy about the quality of digital services on offer.

80% of UK consumers rate digital services offered by financial services providers as important or exceptionally important.

More than 25% say that digital excellence makes them feel more loyal to the company or brand providing it.

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4. https://www.gartner.com/doc/2974430/hightech-tuesday-webinar-market-technology

Santander is actively investing in disruptive technologies in the

financial technology (FinTech) space through its Santander InnoVentures fund.

Aviva has sponsored a FinTech ‘hackathon’ to encourage

entrepreneurs and developers to propose new products that could transform the sector, such as Foursquare-powered travel insurance.

RBS Innovation Gateway seeks to offer innovators a way to test their ideas on actual

major bank assets to see if they would work in the real world.

The banking industry is more dependent than ever on technology for all aspects of the business4.

Gartner

One of the most effective ways that financial institutions are approaching digital is through an ecosystem of partners and SMEs.

Partnering with digital startups gives financial institutions a faster route to customer innovations. These small-scale, agile operations are developing new digital financial services faster than any of the major players. But that does not mean that the two cannot work together.

Just as important as bridging the gap between the physical and virtual worlds, digital technology must bring together what the customer sees and how the business is run.

Reinventing traditional channels

It's over simplifying to think of digital disruption as just new revolutionary ways to go to market; traditional channels can be digitised as well.

For example Fujitsu is reinventing the ATM for the digital age. In Spain, the country’s largest financial group, CaixaBank wanted to create a network of ATMs that delivered on its customer-first principles. The company conducted workshops with its customers to determine the most important features. Fujitsu then took these recommendations and designed a next-generation ATM that would meet customer needs which is manufactured in its production facilities in Malaga.

The new ATMs allow customers to use contactless cards and make transactions swiftly. They also offer a choice of interactions, including an avatar that uses sign language, high-contrast screens, large text and buttons, a screen reader and keyboard navigation. These features make the ATM easy to use, especially for those who might normally struggle with such services, like elderly or disabled people.

Protecting customers and cash

Bradesco is one of Brazil’s major retail banks. They needed to improve ATM security – a big problem for all South American banks and their customers. By working together, Fujitsu was able to integrate one of the most secure biometric technologies available today – palm vein recognition – into their network of 35,000 ATMs. Now, Bradesco customers simply hold their hand over a sensor at the cashpoint and are instantly and securely identified. And because the technology is so reliable, Bradesco’s fraud-related costs are down to almost zero.

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Mind the gapThe success of front-end digital technologies like mobile apps or multifunctional ATMs demonstrates the digital appetite among the public.

Yet some customers are asked to download different apps for different purposes. In other cases the user experience on a mobile compared to a tablet or a desktop is different. This highlights that silos remain behind the scenes and that there is still much to do to marry front-end applications with back-end systems.

The digital differenceProgressive pension providers have recognised that digital will play a major role in remaining competitive as the market opens up. New rules on access to funds means customers will want more transparency on how their investments have performed.

For fund managers, insurers and pension providers alike, the shift to digital and mobile services demands a shift towards 24/7 operations. The increased amount and frequency of customer contact and the emergence of real-time services will spell the end for batch transactions.

Digital front to back – the key considerations:

• How to consolidate systems to provide a single user experience to customers

• How to integrate cloud computing to support innovation so as to save time and costs

• How to simplify systems in the face of growing front-end complexity from business units, products, processes and compliance

• How to utilise the back office to support real-time processing, faster customer onboarding or cut manual document workflows.

Hybrid IT as a competitive differentiator in financial services

'Cloudability' is an emerging theme in financial services. Everything is 'cloudable' but the business case must determine timing and priorities. That, in a nutshell, is the argument for hybrid IT because there is no such thing as a 'one size fits all' approach to cloud adoption. For many financial services companies, a complete 'rip and replace' of heritage infrastructure is not the right answer. At the same time, it is clear that cloud should be the platform of choice for new deployments and for innovation, so as to future proof rapidly evolving digitised channels. Hybrid IT is about striking the right balance between legacy technology and new technology, such as cloud computing.

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Do more with customer data

Customers are increasingly likely to expect the same level of personalised service from financial services companies which they have grown accustomed to in other sectors – the so-called ‘Amazon effect.’ Big data analytics can help providers meet these expectations. By tailoring their services based on micro-segmentation, personal behaviours and insights into market sentiment, financial institutions can develop new services ahead of their rivals.

Analytics is everything in a sector that relies on deep insights to set charges, premiums and interest rates. New forms of interaction – such as contact via social media, video consultations or peer-to-peer payments – are generating much more unstructured data too.

5. http://www.i-cio.com/strategy/big-data/item/hadoop-onomics-banking-on-big-data-opportunities

6. Digital Inside Out: Creating a digital-first Britain, Fujitsu, 20157 . http://newsroom.bankofamerica.com/press-releases/consumer-banking/

survey-shows-card-linked-marketing-programs-are-highly-effective-rar via http://thefinanser.co.uk/fsclub/2015/01/four-big-bank-tech-trends-for-2015.html

Top three reasons customers choose digital6

1. Quicker

2. Simpler

3. Helps them save money

■ Investment banking – private bankers use an enterprise cloud app on their tablet in client meetings to show how to reallocate funds based on the real-time performance of stocks.

■ Retail Banking – the BankAmeriDeals programme uses card information to personalise services ‘at the point of relevance’ with offers for the stores they know customers shop at7.

■ Insurance – linking external sources of data, such as Environment Agency flood information, could cut the time it takes to process claims – saving effort and generating customer loyalty.

■ Pensions – using analytics to assess the effectiveness of a pension plan in providing income post-retirement could allow a provider to advise or even sell other services to help people combat any shortfall.

Most companies only ever analyse around 12% of the data they hold, leaving potentially valuable data on the cutting room floor.5

Mike Gualtieri, Forrester Research

By improving the use of big data analytics, companies can maximise the utility of the data they already hold. This not only improves services to existing customers who prefer to choose digital over other channels – so driving levels of retention and customer satisfaction – it also makes it possible to capture new clients from competitors, who have yet to fully understand the significance of such approaches.

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8. Digital Inside Out: Creating a digital-first Britain, Fujitsu, 2015 9. Fujitsu Technology and Services Vision 201410. PwC Retail Banking 2020 via http://www.slideshare.net/PWC/banking-trends-

32411479?related=211. http://www.intel.com/content/dam/www/public/us/en/documents/solution-

briefs/intelligent-digital-technologies-empower-bank-branch-brief.pdf12. http://www.mintel.com/blog/finance-market-news/how-the-financial-services-

sector-can-capitalise-on-mintels-get-smart-trend-in-2015

The customer drives innovationThe customer is central to the shift in business model for financial services providers. They want a consistent experience, greater mobility and more engagement.

These internal and external customer touchpoints, including Internet of Things (IoT) devices, are combining to create a rich digital ecosystem based around customer preferences.

Pensions – NOW: Pensions aims to simplify the pensions process for employers

and employees alike.

Insurance – Metromile has taken an innovative approach to premiums by

offering a per mile car insurance service.

Corporate banking – OzForex launched with the aim of rewarding people for

referring others.

Retail Banking – Civilised Bank is launching without branches but a network of local

bankers backed by a digital service platform.

Meet the digital natives

Bridging the Gap

In Australia, NAB created an interactive branch window based around a

Handball Challenge. This gamification of the engagement process helped NAB promote interest rates and other services while using anonymous viewer analytics to determine the demographics of those standing in front of the signs.11

In Russia, AlfaBank is giving its customers preferential interest rates based on

the data it receives from their fitness trackers12.

Some of the major challenges financial institutes face when bridging the gap between digital inside and out are fragmented customer systems and legacy applications that lock vital data away. Both large financial organisations and financial regulators are addressing this by using technology such as Fujitsu RunMyProcess to overcome the technical barriers to digital transformation. RunMyProcess specifically is helping organisations rapidly create, deploy and distribute highly customised enterprise and mobile business applications to connect silos of information; reducing time to value and enabling digital scale. The outcome has been end-to-end digital solutions that seamlessly integrate infrastructure, information and people.

Safe and securePerhaps more than any other sector, financial services customers want to know that whichever digital service they use, their money or confidential information is safe and secure.

After the global financial crisis, trust remains a key issue in the sector. So providers must ensure watertight data security and regulatory compliance to give customers the confidence that they are placing their data and their money in the right hands.

Staying one step aheadIn the UK in 2014, 29 new organisations applied to the regulator for a banking license9. These challenger banks and financial services providers, such as Nutmeg, combine clever marketing with targeted services and digital platforms to take market share.

In other areas, such as foreign exchange trading, the globalisation and commoditisation of services allows new entrants to gain customers with the ability to offer low-fee services. Insurers are faced with more customers who are willing to switch.

55% of bank executives view non-traditional players as a threat to traditional banks.10

36% of consumers said that security concerns were a barrier to the use of digital services.8

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Digital experiences begin and end in the back office, powered by every customer interaction and internal data stream.

Anne MacRae, Head of Financial Services, Fujitsu UK & Ireland

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Fujitsu research shows that a healthy 63% of financial services employees think that digital services make their lives easier. Encouragingly, 71% are satisfied with these digital services – compared with just 50% two years ago.

Despite this, 61% of financial services employees think that their employers should invest more in digital in the next two years. And when asked where this investment should be spent, Finance and Customer Service came out on top.13

So how can companies use digital to support their employees? Answers include offering the ability to work remotely or to deliver personalised information and sales collateral directly to their mobile devices. In fact, 57% of workers cite mobility and flexibility as the principal benefits they get from digital services.

Faster, smarter decision-making is also important to employees. Exactly half of those questioned said that real-time access to information is one of the biggest benefits of digital services in the workplace14.

13, 14. Digital Inside Out: Creating a digital-first Britain, Fujitsu, 2015

Top three benefits of digital to employees

said that real-time access to information is one of the biggest benefits of digital services in the workplace.

believe that the future success of their organisation hinges on the effective use of digital technology.

1. Mobility

2. Make decisions faster

3. A 360° view of the customer

360

of financial services employees are satisfied with the digital services provided to them, up from 50% two years ago.

50%

77%

The impact of ‘digital inside’The employee perspective

For employees of financial services companies, not only can digital make their lives easier but it can also accelerate decision making through real-time access to data.

71%

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Value what you have alreadyWhile the sector is certainly not lagging behind others, 60% of employees still believe more investment in digital is required in financial services.

Yet investment in digital services does not have to come at the expense of currently successful back-end technologies. Rather than replacing them all, modernising those that work well and integrating them with new digital investments can optimise the benefits of digital transformation in the enterprise.

The first step in this journey is Legacy Modernisation – reviewing all applications and hardware to determine whether they are fit for purpose. The next step is to identify what is still needed to support digital transformation, such as public, private or hybrid cloud.

Two-thirds of employees believe that new digital services in the workplace are making their jobs easier to do.

Review of training spend – employees feel valued when they can log in to a portal and see how much the company is investing in their training and benefits.

Streamlining laborious HR processes – this frees up more HR and staff time to get on with being productive and removes the hassle of bureaucracy.

Technology as an enabler – having mobile platforms and apps that are synced with enterprise systems gives staff more freedom in and out of the office/branch (everything is in one place for anytime, anywhere working).

Saying yes – such as providing the secure networks that allow employees and customers alike to share WiFi and BYOD practices without compromising data.

4 ways digital can improve the workplace

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Changing times for IT staff

A rapid growth of mobile banking, massive changes in pensions regulations and the demand to do more with data bring threats and opportunities to financial services providers. Staying competitive will depend on highly accurate data and systems that can:

■ Enhance the customer experience■ Support growth or maintain margins

■ Keep digitally savvy employees happy■ Protect sensitive or confidential

information

So what's top-of-mind for financial institutions?

■ The ability to scale to exploding data volumes.

■ The security of corporate data across cloud environments.

■ Potential threats, from careless errors to full blown industrial espionage.

■ Quality of service delivery to meet consumer expectations for premium experiences.

■ Maintaining service levels whilst reducing cost.

■ The overhead of maintaining legacy systems that struggle to adapt to new business needs.

■ The proliferation of ‘shadow IT’ and the need to support non-traditional devices.

Enabling the Digital Workplace

In financial services, as new challengers enter the market, the importance of employee productivity and talent retention is vital. Employees want access to the same services and applications they have at home.

To address this, one large global financial services organisation that Fujitsu works with has started the journey to realise a truly digital workplace, and they’re already reaping the benefits.

Through the implementation of Fujitsu’s Workplace Anywhere solutions, they have enabled more than 20% of employees to regularly work from home and improved employee satisfaction from 2.5 out of 5 to 4 out of 5. Moreover, by implementing digital workplace services Fujitsu has delivered more than £500 million of savings, and counting, through property reductions and productivity increases.

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That’s why at Fujitsu we don’t pretend to have all of the answers. Instead, we've built up a unique and expanding ecosystem of large and small partners to shape the competitive digital edge you need to thrive in this hyper-connected world.

We have experience in modernising end-to-end business operations, by building new digital front-end experiences, and seamlessly connecting these to the back-end systems and infrastructure that enable them, using unique technology such as Fujitsu RunMyProcess.

As experts in legacy modernisation, as well as new digital and cloud platforms, we balance the drive for innovation with the need for business continuity through our Hybrid IT approach. We take a pragmatic, evolutionary approach to digital modernisation: from launching or improving a single service, to delivering multiple solutions that, together, achieve enterprise-scale transformation.

From profitability, to customer engagement, to launching new products and services, Fujitsu will help you realise your digital ambitions, by building the best solutions for today, and then helping to manage and maintain them into the future.

Fujitsu’s Digital

2.0

Here to help - Fujitsu, a digital partner for financial servicesYou can see for yourself the exciting yet challenging opportunity that digital presents for financial services in the sheer speed of evolution and adoption that you must work toward today.

Fujitsu • Unrivalled legacy apps knowledge • Enterprise-scale transformation • Best in class global technologies • In partnership with innovative SMEs

Your Business • Customer-centric • Competitive • Profitable • Agile

About FujitsuFujitsu is the leading Japanese information and communication technology (ICT) company offering a full range of technology products, solutions and services. Approximately 162,000 Fujitsu people support customers in more than 100 countries.

We use our experience and the power of ICT to shape the future of society with our customers.

Copyright © Fujitsu Services Ltd 2015. All rights reserved. No part of this document may be reproduced, stored or transmitted in any form without the prior written permission of Fujitsu Services Ltd. Fujitsu Services Ltd endeavours to ensure that the information in this document is correct and fairly stated, but does not accept liability for any errors or omissions.

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