The Future of Payments:Delivering Digital Transformation
Channie Price
CO-OP Financial Services
June 18, 2019
Members - Your Most Valuable Asset
“For 2018, the financial industry maintains record-high customer satisfaction at an ACSI score of 81 and marks the first year that banks rate as high as credit unions.” Source: The American Customer Satisfaction Index
(ACSI) Finance and Insurance Report 2018
Key to Member Experience is Data
73%
of business leaders say that delivering
a relevant and reliable customer
experience is critical to their company’soverall business performance.
13%
of companies have a single sourceof customer
intelligence today, and
30% are working toward that.
23%
say they are able to act on all or most
of the customer data that they collect.
HBR and Salesforce Study
Challenges and Opportunities:How are Financial Services Evolving
Sources: CB Insights, Crunchbase, Funderbeam, Bloomberg; Market Data as of June 2016
Disruption from Every Direction
Macro-economic Situation
Source: Accenture
Comparator
Coupons,Vouchers,
Loyalty
TargetAds
D-MarketPlace
Ticketing
PolymorphicPayments
BuyingSuggestions
Near Future for FIs: Evolution of Traditional DeliveryA 360° Financial Services Experience via a Living, Breathing Ecosystem
Comparator
Coupons,Vouchers,
Loyalty
TargetAds
D-MarketPlace
Ticketing
PolymorphicPayments
BuyingSuggestions
Record FinTech InvestmentUS fintech investment for 2018 more than
doubled to $52.5B, from $24B in 2017.
Banks Investing In Ecosystems
Developing an ecosystem through acquisitions $1.4 Billion major technology investment in 2018 aloneMobile-only bank: “Finn by Chase” (4-mins to open account)Digital car buying/loan service“Quick capital” for business customers
Focusing on a partnership strategy Collaborative relationships with Intuit, Sigfig, Xero, Finicity and BlendDigital account acquisition (5-mins to open account)Personalized advice at scale
Focusing on Digital Innovations$3 billion annually in technological initiatives, such as AI bot, Erica35M digital customers / 25M mobile banking users”Peopleless” financial centers
You Can See the Opportunity…But How Do You Get There?
Top Drivers for Financial Institution Transformation
Source: Capgemini Financial Services Analysis, 2018
29.2%
41.7%
58.3%
75.0%
95.8%Offering Customers a Better Experience
Cost Reduction Measures
Developing New Products/Revenue Streams
Need for Introducing LatestTechnologies/Replacing Old Tech
Need for Conforming to FastChanging Regulations
Driving Transformation Shift Towards Digital
90% Financial services firms who have commenced digital transformation activities
30% Digital transformation activities that have yieldedresults
How Consumers Want to Engage
Human Interactionin branches for
complex tasks and as main trust driver
Superior CX & Technology
main drivers to attract new customers
Mobile Firstnow the paradigm for
vast majority of consumers
Find a Balance Between Superior CX, Human Touch When Needed, and a Certain Coolness Factor to Attract New Members. Design the end-to-end member journey.
Overall Experience
40% OF GLOBAL CONSUMERS ARE NOW POTENTIAL NOMADS-
OPEN TO SELF-ASSEMBLING THEIR OWN SUITE OF BANKING PRODUCTS
Payments are the Gateway to Opportunity
Payments Ecosystem: Partnering for Growth
Retailers
• Drive customer loyalty
• Increase Spend
• Reduce transaction cost
• Reduce purchase friction
Fintech
• Facilitate Online Commerce
• Create Alternative Payment Networks
• Reduce Transaction Costs
• Leverage Data for insights and marketing
Credit Unions & Banks
• Protect Revenue and Relationship
• Support migration to online commerce
• Create alternative network?
Payments Objective
What We Know – Payments Cannot Be Neglected
Payments revenue is 25% to 50% of non-interest income at credit unions and banks
Multiple players in the payments industry are trying to take that revenue
• New players (PayPal, Square, Apple) have powerful models
• P2P and Real time payments are becoming a rising threat to card revenue
• Merchants are investing heavily in ways to bypass MasterCard and Visa fees
• Wallet players are trying to control money movement
Consumer payments behavior is fundamentally changing
We are likely to continue to see compression of debit fee income due to:
• Reduced margins based on network merchant deals
• Migration of signature debit to PIN and compression on PIN margins
Payments need to be actively managed to maximize interchange, fee and interest income while reducing expenses
Mobile usage and multi-channel customer relationships may be the new “sticky”
Payments Industry Market Forces
There are many pressures, but the U.S. debit and credit card markets are expected to continue to enjoy healthy growth
PriceCompression
Financial Industry
Consolidation
Fraud & DataBreaches
PaymentsDisruptors
New Regulations
Financial Institutions
Merchant Acquirers
Core Processors
Target
Home Depot
Neiman Marcus
PayPal
Apple Pay
Samsung Pay
Card Act
Durbin Amendment
CFPB Proposed Prepaid Rules
NACHA/Fed Same Day ACH Rules
Competition
Service Commoditization
Financial Institution Consolidation
Michaels
Counterfeit Card Fraud
Card Not Present Fraud
Chase Pay
Walmart Pay
Delivering Digital Transformation: How We Get There Together
In 2019, digital transformation moves from super-wide enterprise efforts to a pragmatic, surgical portfolio view of digital investments with the goal of making incremental and necessary changes to operations.
Source: Forrester-Predictions-2019
Travel Notifications
Member Rewards
Members Expect Digital Experiences
Card Controls & Alerts
Bill Pay
CO-OP ATM &Shared Branch Locator
P2P Payments
Cardless Cash
Lost/Stolen
Card Activation & PIN Change
Digital Card Issuance
Online/Mobile Banking
CU/Member Needs
Interaction by Use Case
Digital Channels
Service, Operations &Technology
Master Data Management
Enterprise Security
3rd Party Service Providers
Open SolutionEnvironment“OperatingSystem for CU”
CU/Member Needs
Interaction by Use Case
Digital Channels
Service, Operations &Technology
Master Data Management
Enterprise Security
3rd Party Service Providers
Open SolutionEnvironment“Operating
System for CU”