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KNOWSBDOBANKING INDUSTRY
CHALLENGES PART ONE
2013
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FINANCE CATEGORYBUSINESS CHALLENGES
BBDOKNOWS
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SLOW MOTION RECOVERY
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HOW WOULD YOU DESCRIBE THECURRENT BANKING
ENVIRONMENT?
BBDOEXPERT VIEW:
LEILA GHORASHI, Senior Director,Corporate Executive Board Financial
Services
ZERO GROWTH
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The economy remains fragile across many markets, there are of coursepromising signs in developing markets but the developed world is stilldesperately seeking growth (Deloitte)
The economy and the slow motion recovery continues to hinderbanking growth
Weak credit demand from consumers and shrinking interest incomeare both impacting banking growth. The credit market remains
especially sluggish in the Euro zone and well below its pre-crisis peak(CEB)
SLOW MOTION RECOVERY
Sources: Deloitte 2012, The Economist Euro Crisis Blog 2012, Corporate Executive Board 2012
LOW
GROWTH
IMPLICATIONS FOR THE BANKING INDUSTRY
Bank profits at a global level remained negative for
a fourth consecutive year in 2011 despite positive
numbers in Asia (awaiting 2012 numbers)
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WHAT WILL BE THE MAIN SOURCES OFREVENUE GROWTH IN 2013?
BBDOEXPERT VIEW:
ANNABEL GORRINGE, Head of Content forBanking, Datamonitor
Opportunities are limited. Were going to seeanother 12 months of cost administration andlimiting the damage of past challenges rather
than seeing major revenue growth.
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WHAT ARE YOUR MAIN CHALLENGES IN 2013?
BBDOCLIENT VIEW:
While we are recovering well from the financialcrisis of '09, individuals and families are still notwhere they were. We are continuallysurrounded by world news that reminds us mostof the world is still deep in crisis - this weighsheavily on underlying confidence in their future,confidence to make decisions and take action,willingness to try new solutions, and trust in afinancial institution.
VP Marketing, Royal Bank of Canada
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WHAT ARE YOUR MAIN CHALLENGES IN 2013?
BBDOCLIENT VIEW:
Global Head of Marketing Communication, BESPLEASE PLAY BES BANKING CONTEXT FILM
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The external context continues to limit growth and
profitability for the banking industry and impacts the waybanks do business as they operate in a context of extremeefficiency with too many uncertainties BES
CHALLENGE:
Banks need to address their own business andbusiness models in order to limit the impact of theexternal context and to increase their own profitabilityand thus aid the recovery of the industry
IMPLICATIONS FOR BANKS
IMPACTING
PROFITS
SLOW
MOTION
RECOVERY
LIMIT THE
IMPACT
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KNOWSBBDOSUPERVISION
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WHAT ARE THE MAIN CHALLENGESFOR BANKS IN 2013?
BBDOEXPERT VIEW:
ANNABEL GORRINGE, Head of Content forBanking, Datamonitor
Regulation which is having a huge externalimpact. We already know of many big regulationsimpacting the market- these we know about.
What really interests us is what comes next.
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WHAT HAVE BEEN THE MAIN CHALLENGES IN THE
PAST 20 YEARS?
BBDOCLIENT VIEW:
The financial crisis of 2008, the impact on
the marketplace and the creation ofexcessive regulatory processes andhurdles.
VP Marketing, Royal Bank of Canada
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2013 looks to be the year of supervision, or as Ernst & Young deems itintrusive supervision, if 2012 was the year of regulation, this is the year ofimplementation and a new era of regulation
Analsyts agree the regulators are re-writing the rules (Financial Times),Governments and central banks across the world continue to takeunprecedented measures to stimulate growth (Boston Consulting Group)
For bigger bank networks the challenge is that they are global, but regulationis national and varies according to market
The resulting context for banks is ongoing uncertainty and the threat ofcontinued imposed regulation and the resulting consequences, the CEBsuggest this makes it very difficult for banks to commit boldly to newproducts and services
SUPERVISION
IMPACTING
REVENUES
IMPLICATIONS FOR THE BANKING INDUSTRY
Rules and regulations are said to have reduced US bankrevenues by $75BN since 2007
Source: Ernst & Young, Boston Consulting Group, Kantar Media, The Financial Times, Corporate Executive Board
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As a consequence of the crisis the banking industry issubject to continued regulation. Banks, globally, have tooperate in a context of yet more uncertainty as rules andregulations continue to change and impact their models &finances
CHALLENGE:
Again, banks need to address their own businessmodels in order to limit the impact of regulation. Inthe long term the desire is for greater independence
and relaxed restriction, this relies on the industryregaining confidence
IMPLICATIONS FOR BANKS
IMPACTING
REVENUES
INCREASED &
CONTINUED
REGULATION
LIMIT THE
IMPACT
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KNOWSBBDOCOMPETITION
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THE BANKING SECTORWILL BE HYPERCOMPETITIVE
FOR THE NEXT 3-4 YEARS.Booz & Company
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WHAT DO YOU EXPECT THE FUTURE BANKING
LANDSCAPE TO LOOK LIKE?
BBDOCLIENT VIEW:
Marketing Director, National Bank of Greece
It is almost certain that there will be furtherconsolidation down the road When theprocess is completed, it is estimated that three
well-capitalised large banks will remainalongside a few smaller ones Banks ingeneral will be in a position to benefit from theeconomies of scale and synergies resulting
from the process of consolidation. Theemerging new banking landscape will thus bequite different.
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HYPERCOMPETITIVE = CLOSURES & CONSOLIDATION
Analysts agree the context for banks is about to get even
busier, the expectation is that the fittest will survive andthat the global banking landscape will be redefined, withfewer remaining banks that are less complex (Ernst & Young)
There will also likely be a widening gap between the
leaders and their followers
HYPERCOMPETITIVE
CLOSURES
IMPLICATIONS FOR THE BANKING INDUSTRY
Jones La Salle predict that as many as 50% ofbranch networks may be declared obsolete in thedeveloped world by the decades end
Source: Ernst & Young, Jones La Salle
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Jones La Salle
SOME OF THE BIGGEST
COMPETITORS TO BANKS
OVER THE NEXT 10 YEARS
WILL BE THE TELECOMS
COMPANIES... COULDSTARBUCKS MOVE INTO
BANKING?
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WHAT ARE YOUR MAIN CHALLENGES IN 2013?
Global Head of Marketing Communication, BES
BBDOCLIENT VIEW:
PLEASE PLAY BES COMPETITION FILM
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WHAT ARE THE KEY CHALLENGES IN 2013?
BBDOEXPERT VIEW:
ANNABEL GORRINGE, Head of Content for Banking,
DatamonitorPLEASE PLAY DM COMPETITION FILM
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NON TRADITIONALS
The shape of the competition will also change with Deloitteremarking traditional banks need to be aware of the disruptors.One of the biggest challenges will be defending the paymentsbusiness which until now banks have owned
Whilst Datamonitor dont expect the non traditionals to makehuge inroads, they do expect them to alter the structure of themarket and change customer expectations with implications for
the entire banking industry
CHANGING SHAPE OF COMPETITION
DIMINISH
REVENUES
IMPLICATIONS FOR THE BANKING INDUSTRY
PayPal is already half the size of CitiGroups globaltransaction services business
Source: Deloitte,Datamonitor
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The growth of so called
payday lenders has been
significant. They position
themselves as fast,friendly and accessible.
Their websites are simple,
clear and easy to use, the
application process is fast
and the decision even
faster.
Their communication is
high profile, in the UK,
Wonga sponsors popular
entertainment shows and
employs characters to
bring a likeability and
personality to the brand
http://www.barclays.co.uk/PersonalBanking/P1242603570446?WT.mc_id=301RDpingit
EXAMPLE: COMPETITION PAYDAY LOANSWONGA, UK COMPETITION
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Marks & Spencer is one
of the most well known
and loved department
store and grocerybrands in the UK, its
move into banking is
significant, we await to
see the uptake but we
expect it to be healthy
http://bank.marksandspencer.com/
EXAMPLE: COMPETITION -SUPERMARKETSMARKS & SPENCER, UK COMPETITION
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Money Saving Expert is
one of the most
popular finance
websites in the UK. It isfrequently cited as a go
to tool for advice and
more significantly a first
port of call for advice,
diluting the banks share
of the finance
conversation
http://www.moneysavingexpert.com/
EXAMPLE: COMPETITION OFFERING ADVICEMONEY SAVING EXPERT, UK COMPETITION
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The banking industry is becoming increasingly cluttered.Banks are threatened with closure or consolidation or facelosing business to non traditional entrants who are oftenmore endearing to the consumer.
CHALLENGE:
Banks need to continue to own the conversation.Banks also need to own innovation and not allow nontraditionals to woo the disillusioned customer
IMPLICATIONS FOR BANKS
DIMISHING
REVENUES
INCREASINGLY
COMPETITIVE
LANDSCAPE
INNOVATE TO
DIFFERENTIATE
& REMAIN
RELEVANT
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EVEN MORE THAN BEFORE
TECHNOLOGY WILL EMERGEAS A KEY ENABLER AND
DIFFERENTIATOR, RATHERTHAN A COST TO MANAGE
DOWN.
Ernst & Young
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KNOWSBBDOKNOWSBBDOBBDOEXPERT VIEW:
M
ODEL/CHA
NNEL
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The challenge for many banks is to find efficiency in the branchmodel whilst being present and relevant to customers in the onlineworld
Analysts suggest technology has the potential to be a strong pointof difference. Around the globe we will see continuedexperimentation with formats and locations, Jones La Salle saygetting to the right mix of mobile, direct and locations basedchannels will be crucial.
In Asia and South America the question is what are banks going todo to make their branches more relevant and attractive toinvestors and landlords as the challenge is actually acquiringspace
THE MODEL
COST
INEFFICIENCY
IMPLICATIONS FOR THE BANKING INDUSTRY
The branch model is proving expensive to maintain, it isbelieved to cost $0.15 to open a bank account onlinecompared to $65 in branch according to Jones LaSalle. Atransaction that costs $4.25 in a bank, would cost $2.40 ina call center and 0.20 online (Bain) yet branch aidssatisfaction levels
Source: Jones LaSalle, Bain & Co
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Efficient, effective models are key to ensuring profitabilityand stability in the current context. The branch model is
costly but consumers still value the transaction andinteractions they make in person.
CHALLENGE:
Banks must uncover efficient models that continue toadequately service the customer across channels.Innovation in technology is one way to reclaim theterritory of facilitators/innovators
IMPLICATIONS FOR BANKS
IMPACTSRETURN ON
INVESTMENT
COSTLY
OPERATIONS
BALANCE
EFFICIENCY
WITH
EFFECTIVENESS
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PLEASE NOW REFER TOCHALLENGES PART TWO