Staying Relevant, Becoming Prevalent
Mark Sievewright
President, Fiserv Credit Union Solutions
May 24, 2016
© 2016 Fiserv, Inc. or its affiliates. 2
Mega-Trends Facing America’s Credit Unions
Demographic shifts
will have a profound
impact on credit
union growth,
relevancy and talent
The financial
services business
model is being
redefined
New entrants are
challenging the
incumbents – new
forms of distinction
are needed
Technology is
redefining financial
services delivery
and distribution
© 2016 Fiserv, Inc. or its affiliates. 3
Number of U.S. Credit Unions Decreased at a CAGR of 3.5% Between
2006 and 2014 - Consolidation is Accelerating
Number of U.S. Credit Unions, 2006-2014
Source: NCUA Call Report
Num
ber
of
Cre
dit U
nio
ns (
000s)
6,143
12/2015
© 2016 Fiserv, Inc. or its affiliates. 4
The Number of U.S. Banks is in Steady Decline
0
2,000
4,000
6,000
8,000
10,000
U.S. Banks for Commercial Banks and Savings Institutions, 2002-2014N
um
ber
of
FD
IC-
Insure
d I
nstitu
tions
© 2016 Fiserv, Inc. or its affiliates. 5
De Novo Banks have Virtually Disappeared
0
50
100
150
200
250
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Commercial Banks Savings Institutions
Number of De Novo Banks Created Each Year, 2003-2014N
um
ber
of
Banks
© 2016 Fiserv, Inc. or its affiliates. 6
The CU Business Model is Being Redefined
Regulatory changes and related compliance are
proving to be very burdensome for credit unions,
particularly smaller credit unions
© 2016 Fiserv, Inc. or its affiliates. 7
Overall Regulatory Impact on America’s Credit Unions
Total Regulatory Financial Impact (equal to 0.64% of assets) $7.2B
Annual Regulatory Cost Impacts (or 0.54% of assets) $6.1B
Lost Revenues such as interchange income (0.10% of assets)$1.1B
Increase in staff time (since 2010) spent on Regulation91%
© 2016 Fiserv, Inc. or its affiliates. 8
A continuous stream of innovation is re-shaping
consumer behaviors, business models, and the
structure of the financial industry
The CU Business Model is Being Redefined
Regulatory changes and related compliance are
proving to be very burdensome for credit unions,
particularly smaller credit unions
© 2016 Fiserv, Inc. or its affiliates. 9
Evolution of Technology
Technology has moved away
from being a limited-access,
specialized field and has
become a horizontal layer
across our society
© 2016 Fiserv, Inc. or its affiliates. 10
Credit Unions should worry less about
becoming insolvent and much more
about becoming irrelevant
10
Evolution of Technology
© 2016 Fiserv, Inc. or its affiliates. 11
Disrupters Have Had a Dramatic Impact Elsewhere
© 2016 Fiserv, Inc. or its affiliates. 12
Deal activity in payments startups has increased for
5 quarters straight and funding is up 74%.
$25 Billion has been invested in 4,000 FinTech start-up
firms over the past 5 years.
The Financial Services Business Model is Being Redefined
The combination of no physical locations and limited regulatory
costs allows disrupters to keep operating costs low
and offer better terms to their clients.
© 2016 Fiserv, Inc. or its affiliates. 13
The Financial Services Business Model is Being Redefined
• New UK Digital Bank awaiting its license
• Crowdfunding project in March, 2016
• $1.7M of funding raised in 96 seconds
• Represents a 3.3% stake
• 1,861 people invested (on average) $913
© 2016 Fiserv, Inc. or its affiliates. 14
The Financial Services Business Model is Being Redefined
© 2016 Fiserv, Inc. or its affiliates. 15
The Financial Services Business Model is Being Redefined
© 2016 Fiserv, Inc. or its affiliates. 16
The Financial Services Business Model is Being Redefined
© 2016 Fiserv, Inc. or its affiliates. 17
Financial Services Revenue at Risk of Disruption
26%
26%
26%
29%
29%
29%
31%
41%
50%
Sprint (U.S. Only)
AT&T Mobility…
Amazon
Apple
Costco
T-Mobile (U.S.…
PayPal
Square
0% 20% 40% 60%
If These Companies Offered Banking Services How Likely Would You Be to Bank with Them?
© 2016 Fiserv, Inc. or its affiliates. 18
The M.O. of Financial Services Disrupters
Disrupters are most likely to attack incumbents where the
greatest sources of friction meet the opportunity for profit
FRICTIONLESS
BANKING
© 2016 Fiserv, Inc. or its affiliates. 19
Disruptors Have a Fundamentally Different Business Model
SOURCE: McKinsey & Co.
Operations &
Technology
Products
Distribution
Consumers
From…
25%
>500
100s
55
4
20%
80%
<2%
Large,
generic
segments
To…
100%
>1,000
10-20
<5
>8
<5%
<20%
>15%
Mass
personalization
Key metrics
Share of automated processes
Number of IT applications
Number of products
Days to close mortgage
Products per consumer
% of branches in network
Branch/in-person % of sales
Sales conversion ratio
Consumer segmentation
and targeting
© 2016 Fiserv, Inc. or its affiliates. 20
“Financial institutions’ ability to
work with non-traditional players
will become essential to creating
new distribution channels and
enabling non-traditional services”
Partnering with Disrupters?
Jamie Dimon, Chairman & CEO, JP Morgan Chase
Letter to Shareholders, 2015
© 2016 Fiserv, Inc. or its affiliates. 21
“FINTECH-GRATION”
Partnering with Disrupters?
© 2016 Fiserv, Inc. or its affiliates. 22
A Rocky Road Ahead for Online Lenders?
LendingClub Boosts Projected Loan Losses, Raises Rates on Some Loans
Largest online lender will charge riskier customers more to borrow
© 2016 Fiserv, Inc. or its affiliates. 23
6,143Number of Credit Unions
75bpsROA
136 bps/assetsNon-Interest Income
104Million
Memberships
$1.2 TrillionTotal Assets
7.3%Asset Growth
In 2015
The Credit Union Difference
© 2016 Fiserv, Inc. or its affiliates. 24
Change Response
Responding to new kinds of
new entrants is problematic:
it requires a fundamental shift
in strategy and culture - and
culture is hard to change
© 2016 Fiserv, Inc. or its affiliates. 25
What Makes Your Credit Union Distinctive?
Unique? Compelling? Defensible? Sustainable?
© 2016 Fiserv, Inc. or its affiliates. 26
Social Distinction
We are operating in a world in
which the traditional sources
of differentiation might be
inadequate for future success
© 2016 Fiserv, Inc. or its affiliates. 27
Creating Social Distinction
• The consumer feels as like they have activated a lever of goodness
when they make a purchase or support your business in some way
• There is a true (authentic) connection between what the business is
marketing and how the consumer is pulling the goodness lever
• The business is part of the giving, not simply a donor
• The social responsibility is so enmeshed with the core business that it’s
virtually indistinguishable
• Effective Social Media leverage and strong levels of engagement
• It helps if the model is simple and basic.
© 2016 Fiserv, Inc. or its affiliates. 28
Social Distinction
To win, companies must (of course)
deliver value and be competent
but they must also compete on
purpose and authenticity
© 2016 Fiserv, Inc. or its affiliates. 29
Social Distinction at TOMS
© 2016 Fiserv, Inc. or its affiliates. 30
Social Distinction at Warby Parker
© 2016 Fiserv, Inc. or its affiliates. 31
BranchBranch
Call Center
Branch
Call Center
ATM
Branch
Call Center
ATM
Web
Branch
Call Center
ATM
Web
Mobile
Branch
Call Center
ATM
Web
Mobile Tablet
Biometric
Recognition
Wearables
?
Changing Channels
© 2016 Fiserv, Inc. or its affiliates. 32
Delivery Channels Redefined
© 2016 Fiserv, Inc. or its affiliates. 33
Delivery Channels Redefined
“Branch
transaction
volume at all FIs
has declined by
45.3% since 1994”
“Over the past four
quarters, banks
have scaled back
by more than
1,500 branches”
© 2016 Fiserv, Inc. or its affiliates. 34
In U.S. Retail Banking, branch use has declined by at least
35% since 2010, and branch users are moving online rapidly
1
1.5
2
2.5
2010 2011 2012 2013 2014
Mean Branch Visits (per month per banked households)
Branch Visits Subset that are Teller Visits
Source: US Consumer Financial Life Survey 2014, FDIC Consumer and Mobile Financial Survey 2014
© 2016 Fiserv, Inc. or its affiliates. 35
Delivery Channels Redefined
© 2016 Fiserv, Inc. or its affiliates. 36
Delivery Channels Redefined
© 2016 Fiserv, Inc. or its affiliates. 37
Net Bank Branch Changes by Year:
A Reflection of a Redefinition of Delivery Channels?
388
(1,031)
(326)
(853)(1,001)
(1,614)(1,487)
-2,000
-1,500
-1,000
-500
0
500
2009 2010 2011 2012 2013 2014 2015
Number of Branches - Net Bank Branch Growth/Decline, 2009-2015
Num
ber
of
Bra
nches
© 2016 Fiserv, Inc. or its affiliates. 38
No U.S. state or territory logged net bank-branch additions in
the cumulative period running from 2009-2014
© 2016 Fiserv, Inc. or its affiliates. 39
Insights on the Branch of the Future
Branches will remain a relationship cornerstone for acquiring and retaining
deposits and growing profitably.
Fewer transactions in branches - focus shifts to advice, loans and small business
services.
The implementation of self-service technology in branches will free branch staff to
spend more time with members.
Branches must be tightly integrated with other delivery channels, giving
members channel choice that best meets their needs.
© 2016 Fiserv, Inc. or its affiliates. 40
40
What Does “Integrated” Mean?
© 2016 Fiserv, Inc. or its affiliates. 41
What Does “Integrated” Mean? Mayday, Mayday!
© 2016 Fiserv, Inc. or its affiliates. 42
425,000 ATMs Billions of
Devices
114,000 Branches
16,000 FIs
Delivery Channels Redefined
© 2016 Fiserv, Inc. or its affiliates. 43
Consumers Take Control
Emerging innovations
give consumers visibility
into products and
full control over choices.
© 2016 Fiserv, Inc. or its affiliates. 44
Consumers Take Control
© 2016 Fiserv, Inc. or its affiliates. 45
Expectations
>everywhere
Consumers Take Control
© 2016 Fiserv, Inc. or its affiliates. 46
Expectations
>immediate
Consumers Take Control
© 2016 Fiserv, Inc. or its affiliates. 47
Expectations
>ease
Consumers Take Control
© 2016 Fiserv, Inc. or its affiliates. 48
Evolution of Digital Banking Interactions – Globally
Mobile
Online
© 2016 Fiserv, Inc. or its affiliates. 49
Smartphone, Tablet and Mobile Banking User Growth
8192
116
141
169186
203217
227 236
1538
7898
127
159180
193 201
206
5259
7894
123
145166
184199
211
0
50
100
150
200
250
2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E
Smartphone Owners Tablet Owners Mobile Banking Users in the Past 90 Days
Forecast of Smartphone, Tablet, and Mobile Banking Users, 2011-2020E
Source: Javelin Strategy and Research, “2015 Mobile Banking, Smartphone, and Tablet Forecast,” December 2015
Num
ber
of U
.S.
Consum
ers
(in M
illio
ns)
© 2016 Fiserv, Inc. or its affiliates. 50
Mobile Transactions Post Strongest Growth:
29% CAGR in 2011-2017
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2011 2012 2013 2014E 2015E 2016E 2017E
Branch Transactions ATM Transactions
Online Transactions Mobile Transactions
U.S. Delivery Channel Transaction Volumes (in Millions), 2011-2017E
Num
ber
of T
ransa
ction
s
(in M
illio
ns)
Source: CEB Tower Group, “Enterprise Payments Technology Showcase,” November 2015
© 2016 Fiserv, Inc. or its affiliates. 51
Getting Mobile with Mobile
© 2016 Fiserv, Inc. or its affiliates. 52
Getting Mobile with Mobile
© 2016 Fiserv, Inc. or its affiliates. 53
Wearables Will Impact the Way We Live, Work and Socialize
© 2016 Fiserv, Inc. or its affiliates. 54
Wearables Will Impact the Way We Live, Work and Socialize
© 2016 Fiserv, Inc. or its affiliates. 55
Wearables: Smartphone Banking Apps
© 2016 Fiserv, Inc. or its affiliates. 56
Mobile First:
Design and Execute a Digital Engagement Strategy
Higher
Revenue
Generation
Increased
Product Holding
Lower
Member
Attrition
Higher
Transaction
Activity
© 2016 Fiserv, Inc. or its affiliates. 57
Higher Average Revenue Generated from
Digital Banking Users
Revenue
• Digital Banking users’ monthly revenue per user increased by 10.7% post digital enrollment vs. 4.5% in branch only users
• Revenue = interest income from various types of loans + various fees (Interchange Fee, Late Fee, Finance Charge, Over
Limit Fee etc.,)
Source: Fiserv Proprietary Research, 2016
$510
$521
$23
$56
Non-Digital
Digital +10.7%
+4.5%
Pre-Enrollment Increment
© 2016 Fiserv, Inc. or its affiliates. 58
Average Product Holdings Were Immediately Higher
Product Adoption
• Post digital enrollment, Average Product Holdings increased by 58.4 % for digital users compared to
negligible growth in Branch only users
1.8
2.0 1.1
Non-Digital
Digital +58.4%
+0.4%
Source: Fiserv Proprietary Research, 2016 . Note: Product Holding includes loans, certificates, shares, credit cards and mortgages
Pre-Enrollment Increment
© 2016 Fiserv, Inc. or its affiliates. 59
Higher Debit Activity
• 14.6% increase in digital users vs
0.3% in branch only
11.3
21.6 2.0
Non-Digital
Digital
Amount Frequency
Source: Fiserv Proprietary Research, 2016.
$2,719
$3,514
$8
$512
Non-Digital
Digital +9.3%
-0.3%
+14.6%
+0.3%
• 9.3% increase in digital users vs -
0.3% decline in branch only
Pre-Enrollment IncrementPre-Enrollment Increment
© 2016 Fiserv, Inc. or its affiliates. 60
Lower Attrition in Digital Banking Users
Consumer Attrition Rate
• Digital Banking users’ witnessed lower attrition at 8.9% compared to 13.8% in Branch only users
Source: Fiserv Proprietary Research, 2016 . Attrition computed for post digital enrollment period of 15 months cumulatively (Jan 2014 – Mar 2015)
13.8%
8.9%
Non-Digital
Digital
© 2016 Fiserv, Inc. or its affiliates. 61
Summary of Key Learnings
Value of a digitally engaged
consumers is incrementally higher
Consumers adopting digital
banking are less likely to attrite
Average total product holdings
increased post adoption
Overall engagement and
transactions have risen post digital
banking adoption
Post enrollment, engagement intensity is next
most crucial factor in driving higher value (i.e.
revenue & attrition)
© 2016 Fiserv, Inc. or its affiliates. 62
Omni-channel is Becoming Widespread in Retail
© 2016 Fiserv, Inc. or its affiliates. 63
What is Omni-Channel?
• An integrated delivery and distribution channel approach that
allows members to interact with the credit union for transactions,
service or product acquisition (sales).
• For members this means they can:
• Enjoy more consistent interactions across their various channels
• Choose the channel that best suits them
• Transition seamlessly from one channel to another
© 2016 Fiserv, Inc. or its affiliates. 64
Omni-channel is Becoming Widespread in Retail
© 2016 Fiserv, Inc. or its affiliates. 65
Digital Engagement
Meaningful and
Relevant
Member Connections
Collaboration to Drive
Member Experience
“Think Enterprise” to
Remove Friction
© 2016 Fiserv, Inc. or its affiliates. 66
Digital Engagement
• Simplicity of accessing money and making payments
• Speed of sending and receiving money and information
• Security of account information
• Ubiquity of digital access (PC, phone, tablet)
• Enabling members to understand their entire financial picture
• Relevant and timely communications
• Building engagement
© 2016 Fiserv, Inc. or its affiliates. 67
U.S. Payments will Rapidly Transform
of U.S. consumer spend will occur through digital channels20%+
of digital spend will occur through a wallet$850B
will be transferred between consumers as P2P payments$400B
shoppers will use digital channels to make some purchases 220M
© 2016 Fiserv, Inc. or its affiliates. 68
U.S. Payments will Rapidly Transform
© 2016 Fiserv, Inc. or its affiliates. 6969
U.S. Payments will Rapidly Transform
© 2016 Fiserv, Inc. or its affiliates. 70
U.S. Payments will Rapidly Transform
© 2016 Fiserv, Inc. or its affiliates. 71
U.S. Payments will Rapidly Transform
© 2016 Fiserv, Inc. or its affiliates. 72
U.S. Payments will Rapidly Transform
© 2016 Fiserv, Inc. or its affiliates. 73
U.S. Payments will Rapidly Transform
© 2016 Fiserv, Inc. or its affiliates. 74
Shifting Demographics
© 2016 Fiserv, Inc. or its affiliates. 75
Living in the Age of Aging………
© 2016 Fiserv, Inc. or its affiliates. 76
The U.S. is Undergoing Rapid Population Aging
9.0 16.7 25.7 35.0 53.7 77.2
6.81%
9.24%
11.31%12.71%
16.53%
20.46%
0%
5%
10%
15%
20%
25%
0
10
20
30
40
50
60
70
80
90
1940 1960 1980 2000 2020 2040
US Population 65+ (left axis) Percentage of US Population 65+ (right axis)
Number of people
(millions)
Source: Government reports
© 2016 Fiserv, Inc. or its affiliates. 77
Living in the Age of Aging………
© 2016 Fiserv, Inc. or its affiliates. 78
Shifting Demographics
The rise of the Millennial
generation and a changing
workforce will have profound
implications and opportunities.
© 2016 Fiserv, Inc. or its affiliates. 79
Understanding Millennials
• Over 50% of the world’s population is under 30-years-old
• 75M residents in the U.S. are between 18-34
• 53% of Millennials said they’d rather lose their sense of smell than their
technology (and they are early adopters)
• But, they value financial advice delivered by experts
• They are fiscally conservative
• Their overall philosophy is very well aligned to that of credit unions
• Student debt is a major issue for those who attended college
© 2016 Fiserv, Inc. or its affiliates. 80
Understanding Millennials
What is most important to your daily life?What do you have expertise in?
Source: Bank of America/USA TODAY, Better Money Habits Millennial Report, Fall 2015
© 2016 Fiserv, Inc. or its affiliates. 81
• Millennials have been shaped by technology
• Almost 80% of Millennials have a Smartphone
• Use the Internet, mobile technologies and social media to conduct
transactions and share their opinions about products and services
• ~94% of Millennials are active users of Online banking
• More than 70% of Millennials have used mobile services within the last
12 months (only 40% for remaining adult population)
• The most racially diverse generation in history
• Total student loan balances have tripled since 2004 limiting access and
demand for other forms of credit
CONFIDENTIAL – INTERNAL
Understanding Millennials
© 2016 Fiserv, Inc. or its affiliates. 82
• Millennials value community, family, and creativity in their work.
• Millennials rely on loans to pay for college (> than previous generations)
• Millennials will contend with the effects of starting their careers during a
historic downturn for years to come.
• Millennials tend to get married later than previous generations.
• Millennials are less likely to be homeowners than young adults in
previous generations.
Understanding Millennials
© 2016 Fiserv, Inc. or its affiliates. 83
Understanding Millennials
• Millennials want what they want – they don't care whether it comes
from an established financial brand or a financial disruptor
• They love social media and, also, video:
• Snapchat, Twitter and Instagram rank highest
• The average (true) attention span is 7 seconds
• The average attention span of a gold fish is 8 seconds
• The average attention span in 2000 was 12 seconds
© 2016 Fiserv, Inc. or its affiliates. 84
Millennials’ Perspective on Financial Services
Source: Scratch, “The Millennial Disruption Index,”
© 2016 Fiserv, Inc. or its affiliates. 85
Shifting Demographics: Reverse Mentoring
© 2016 Fiserv, Inc. or its affiliates. 86
Shifting Demographics: Tech-Savvy Elders
• The fastest growing demographic on Twitter is the 55–64 year age bracket.
• This demographic has grown 79% since 2012.
• The 45–54 year age bracket is the fastest growing on both Facebook and Google+.
• For Facebook, this group has jumped 46%.
• For Google+, 56%.
© 2016 Fiserv, Inc. or its affiliates. 87
The Rise and Rise of Multigenerational Households
• 1-in-6 Americans currently lives in
a multi-generational household
• The number rose from 46.5 million
in 2007 to 51.4 million by the end
of 2009 (a 10.5 percent increase
in just three years).
• In 1980, multi-generational
households accounted for 12% of
the U.S. population. By 2010, that
number had climbed to 16.1%
© 2016 Fiserv, Inc. or its affiliates. 8888
Marketing Redefined
© 2016 Fiserv, Inc. or its affiliates. 89
In the future, the information
associated with a transaction
could be more valuable than
the transaction itself
Member Growth and Engagement Enabled by Analytics
© 2016 Fiserv, Inc. or its affiliates. 90
Marketing Redefined
© 2016 Fiserv, Inc. or its affiliates. 91
Marketing Redefined:
Nordea’s Loan Calculator Promotes Personal Loans
© 2016 Fiserv, Inc. or its affiliates. 92
Marketing Redefined:
Deutsche Bank Presents Offers on Mobile Banking
© 2016 Fiserv, Inc. or its affiliates. 93
Mega-Trends Facing America’s Credit Unions
Demographic shifts
will have a profound
impact on credit
union growth,
relevancy and talent
The financial
services business
model is being
redefined
New entrants are
challenging the
incumbents – new
forms of distinction
are needed
Technology is
redefining financial
services delivery
and distribution
Staying Relevant, Becoming Prevalent
Mark Sievewright
President, Fiserv Credit Union Solutions
May 24, 2016