The Future of Retail

Banking Report

In association with: Sponsored by:

The Future of Retail Banking Report | 1

 Forewords
It’s banking, but not as you know it. This is the second consecutive year of
Marketforce’s retail banking survey. Yet again
In a few years, our largest banks may not really we find an industry braced for disruption and
be banks at all. To do banking you need a licence feverishly innovating ahead of next year’s game-
and you are subject to regulation. Not all see the changing regulations.
trade off as worth it – regulation is expensive and
limiting – yet there remains money in deposit Our report provides a snapshot of the industry on
taking for now. However, banking is evolving the brink of the EU-wide PSD2 and the UK’s open
from being our money repository to our money banking reforms, which will open the door to
manager. It isn’t happening overnight, but what new competition and threaten incumbents with
customers want and the services that will be disintermediation. Like photographs taken on the
provided in future are definitely in transition. The brink of war, it’s a report that could, in a few short
evolutionary process of payments efficiency and years, be a historical document, capturing a time
shared information is continuing to advance but is before the competitive battleground changed the
there a revolution to come? banking landscape forever.
Banking evolution comes from market innovation It is too early to identify winners. But it’s clear
and regulatory change. Credit cards, ATMs, and that technology alone will not be enough: adding
online banking came from technology; faster more digital won’t win this war, not when the
payments, improved disclosure and customer competition already has you outgunned. With
protection from government. Today, applications tech titans readying to leverage the open banking
which can access our financial data for improved agenda to quickly gain ground, incumbents must
services intertwine with government mandates play to their strengths: an existing reputation for
on open banking and data protection. For some trust, a proven track record with the regulators
it’s an opportunity, others a threat – brilliant and an understanding of customers’ financial
new products for improved lives, or a Pandora’s needs. To this, they must add bold vision and a
Box with the loss of privacy and money at stake? willingness to collaborate to fuel innovation on
Will the winners be new providers or established behalf of the customer.
banks?
Our research shows this is still a work in progress.
Since 1879, the London Institute of Banking & We surveyed 225 senior banking executives across
Finance has been involved in educating those Europe in October 2017 to understand their
handling money so they are competent and aware readiness for the challenges, and opportunities,
of their responsibilities. From paper to electrons ahead. We hope you find the results as interesting
and from deposits to payments, our role hasn’t as we did.
changed and we are proud to continue working
with the industry on the critical educational
needs for those delivering banking’s future
financial service professionally and safely.
We are delighted to support this timely and
revealing report. Juliet Knight
Director, Marketforce

Pete Hahn
Dean, Henry Grunfeld Professor of Banking ,
The London Institute of Banking & Finance (LIBF)

2 | MoneyLIVE by Marketforce The Future of Retail Banking Report |3

 Introduction
Contents
The bank of the future may be many things – but it may not be a bank. Some customers
already have an appetite to trust their finances to innovative new entrants with smart
budgeting and money management tools. And there’s a host of companies eyeing the
banking space, from FinTech start-ups to challenger banks to tech giants.
Introduction 5 Incumbent banks must work hard to prove their relevance in a changing world. Regulators
are about to force massive disruption, in the form of the revised Payments Services
Chapter 1: 6-13 Directive (PSD2) and the open banking reforms. This is reform enabled by technological
The Rise of Open Banking change, which, via open Application Programming Interfaces (API) allows new entrants
to plug into incumbents’ systems to access customer and account data, levelling the
playing field, powering innovation and fuelling disintermediation. Open APIs are also the
Chapter 2: 14-22 digital glue that allows unparalleled collaboration within and between organisations and
Bank of the Future even across industries, creating platform businesses that transcend traditional industry
boundaries: the bank of the future as a platform.

Chapter 3: 23-34 PSD2 and open banking are not the only challenges ahead. Banks must also contend with
The Next Phase of the Technology Revolution new data protection laws, low growth macro-economic conditions, Brexit uncertainty and
changing customer expectations for seamless 24/7 interactions across multiple channels.
They must find new talent to equip the workforce for the future: AI and automation
Chapter 4: 35-41 will change or eliminate many roles but create others that may be in short supply as
Digital Experience companies scramble to keep pace with new technologies and changing customer
behaviours. Banks must be ever-vigilant for fraud and cybercrime as a hyperconnected
world creates new vulnerabilities and new threats. And, looming ever closer, is the
Chapter 5: 42-48 competitive threat posed by the tech giants, which may well leverage open banking to
Channel Innovation launch Uber-style disruption.

Chapter 6: Banks have a range of choices to survive this series of shockwaves: specialisation, a retreat
49-56 to utility-type banking services or capitalise on their trusted reputations to act as partner of
The Future Customer Relationship choice to help customers navigate a changing world. There are big decisions but one thing
is clear: the face of the bank of the future will belong to the bold.
Methodology 57

4 | MoneyLIVE by Marketforce The Future of Retail Banking Report |5

 The Rise of Open Banking
Over the past decade, regulators have sought to redress the perceived greed and recklessness that were
judged to have caused the financial crisis. Since 2008 the mood has been for ever more scrutiny and ever
tighter constraints on operating models. Until now.

The Revised Payment Services Directive (PSD2), which is due to come into force in January 2018, will
encourage banks and FinTech companies to innovate, experiment and move in new directions. It is set to be
a catalyst for profound change in retail banking. And, while this is an EU directive, it has spurred initiatives

Chapter 1: around our interconnected world, from Canada to Singapore.

PSD2 is a leveller: incumbents will no longer hold

the winning hand when it comes to customer data
and payments. By forcing banks to grant third-
What is an API?
The Rise of Open party providers (TPPs) access to a customer’s The enabling technology of PSD2 is the
account information and initiate payments on the application programming interface (API), often
Banking customer’s behalf, PSD2 puts all the cards on the described as the “digital glue” that allows
table. This opens the door for TPPs to use customer different software applications, both within
account information to provide value-added and between organisations, to share data for a
services or give customers a seamless payment specific purpose without exposing the rest of the
experience direct from their bank accounts. By application. This allows organisations to open
creating a level playing field for all payment services some of their data and functionality to third party
Sponsored by:
providers, PSD2 will increase competition and foster developers, who can then use that data to write
innovation. This is good news for the customer, and new applications and tools.
for FinTech innovators, but the jury is still out on
whether it will be good news for banks, which risk There are three types of APIs: private APIs
losing a direct relationship with the customer and that are used to reduce friction and enhance
valuable opportunities to cross-sell products. operational efficiency; partner APIs that banks
grant to specific third-party partners to expand
In the UK, this risk is magnified by the Competition product lines and channels; and finally, Open
and Markets Authority’s (CMA) Open Banking APIs, that make business data available to third
initiative, which mandates the nine largest banks in parties that may not have any formal relationship
the country to provide access to banking data via a with the bank. This is more of a leap for many
standard API so that personal and small business banks, anxious about security and reputation,
customers can manage their accounts with multiple yet it’s a proven way to fast-track innovation and
providers through a single digital app. This will fuel connectivity. Just ask Amazon, Facebook, AirBnB
the process of disintermediation and the unravelling and Netflix, which leverage open APIs to build
of established banking value chains. With all their out their functionality and scale quickly across so
accounts in one place, customers will be able to many platforms and territories.
better manage funds across accounts to avoid
overdraft charges or even switch to another provider Embracing this technology presents an
to get a better deal. One survey of UK bankers found opportunity for banks to act as a springboard for
73 per cent expect open banking to diminish the innovative new services and products, developed
advantage of existing customer relationships and by third parties but loved by their customers.
make it more difficult for banks to cross-sell1.

The Role of Analytics in the New Banking Age, Earnix/Marketforce 2017

1

6 | MoneyLIVE by Marketforce The Future of Retail Banking Report |7

 Platform banking – combatting the
disintermediation threat and the rapid build out of new services. Amazon, Some traditional players have also taken significant
Apple, Facebook, Google and Microsoft, for example, steps. In May 2017 Spanish bank BBVA announced it
Banks now stand at a crossroads. They must all offer open APIs to allow developers to integrate was making eight of its APIs commercially available
either find ways to play a central role in the with their voice-activated digital assistants. to companies, startups, and developers worldwide,
customer’s daily life in order maintain cross-selling so that customer data can be integrated into third
opportunities or they must accept a new role, as a Some banks have already, irrespective of any party products and services. Prior to launch, more
white-label utility provider of banking services, with regulatory pressure, placed open APIs at the heart than 1500 developers and companies registered to
little, if any, direct interaction with the end customer of their strategy in order to deliver the very best collaborate on the initiative. Companies will be able
and the associated downsides of lower margins service to their customer. German online challenger to use individual data sets to build personalised
bank Fidor, which was acquired by French banking services with customer permission, and some
and negligible cross-selling opportunities. In this
group BPCE in July 2017, uses open APIs so that anonymous, aggregated data sets will also be
context, our survey gives serious cause for concern:
developers can create their own apps that plug commercially available. The aim is to build a suite
more than half of our respondents (54 per cent) said
into Fidor’s systems. It means Fidor’s internal of new value-added services and improved user
their organisation’s approach to open banking was 54% said their organisation’s approach systems or investment priorities never act as a brake experiences, such as seamless loan origination
principally reactive rather than proactive. to open banking was principally on innovation that could improve the customer whereby an API is integrated into the checkout
reactive rather than proactive experience, be it new services to deal in foreign process so that a customer can finance a purchase at
73 per cent of our respondents agree that, as open currencies and precious metals or tapping into point of sale with a BBVA loan.
APIs heighten the risk of disintermediation, banks Nutmeg’s wealth management software. In October
will face an uphill struggle to remain integral to 2017, Fidor added further functionality with the In the Nordic region, Nordea has launched what it
customers’ lives. To stay relevant, banks must be launch of FinanceBay, an online marketplace which hopes will be the “go-to-hub” for banking APIs in the
prepared to share data and work in new ways to connects curated FinTech, InsurTech and TradeTech region. It has set up a bespoke site where developers
deliver powerful propositions that add real meaning offerings from the wider ecosystem so customers can experiment with two open APIs, one a payments
and value to customers on a daily basis. Worryingly, can easily browse financial products and access initiation API for integration with third-party web
however, there are indications that some banks are convenient tools to better manage their finances. services and one an account information API. Within
According to Fidor Bank CEO Matthias Kroner, API 24 hours of going live, the site had registered 130
resistant to the idea of sharing data with third parties
banking is “critical”: “If you want to deliver the expressions of interest from third-party developers.
that want to access their APIs: in October 2017, the
73% agree that as open APIs heighten richest and most value-added service, you need to
European Commission launched a probe to find out
open up2.” Banks that are not already exploring collaborative
whether banks are deliberately preventing non- the risk of disintermediation, banks will ventures need to act fast: 92 per cent of our
bank competitors from gaining access to customer face an uphill struggle to remain Numerous of the mobile-first neobanks are, of course, respondents think it will be critical for banks to
account data, with anti-trust officials conducting already making good use of the app economy. In embrace open APIs and the associated opportunities
unannounced inspections of institutions in the integral to customers’ lives
2015 Monzo published an API that enables any to improve their customer offerings through
Netherlands and Poland. Monzo customer to download and play with their partnerships if they are to survive beyond the next
own data; there are now dozens of tools, from mobile ten years. Indeed, 55 per cent expect that within
Banks that want to maintain their position at the top of the value chain must leverage API integration to dashboards to maps, built by enthusiasts. More the next 2 years it will have become a strategic
develop banking portals that draw in services and propositions from a range of third party innovators that recently, Raisin, a one-stop-shop open market for imperative for banks to embrace the partnership
customers find they cannot live without. It’s banking as a platform, and it’s the coming mega-trend that will savings products giving customers the best interest opportunities flowing from open APIs, rising to 93
change how we bank forever. rates in Europe, developed its own API, allowing per cent within 5 years.
banks to plug into the app and act as distribution
partners. Mobile bank N26 was the first distribution
The power of collaboration partner to use the Raisin solution to integrate savings
offers into its online banking platform.
Digital leaders, from Amazon and Apple to Salesforce and Twitter, frequently connect with innovative

92%
firms outside of their organisation to deliver attractive services to their customers. Rather than compete
with existing retailers, Amazon chose to enable them, launching Marketplace, a fixed-price retail platform of our respondents think it will be critical for banks to embrace open APIs and
that allows third-party vendors to access billing, marketing, distribution, and customer relationship
the associated opportunities to improve their customer offerings through partnerships if
management systems. In doing so, Amazon created an ecosystem of retailers who are wholly integrated into
its fulfilment process – and the end result is more choice for customers, backed by an Amazon gold standard they are to survive beyond the next ten years.
customer experience. Open APIs underpin this kind of win-win digital collaboration, accelerating innovation
The Future of the Digital-only bank, www.mx.com
2

8 | MoneyLIVE by Marketforce The Future of Retail Banking Report |9

 Staying relevant – analytical advantage
The collaborative platform banking model isn’t just The resilience of customer trust in the wake of the The CBA also emphasises the need to ensure that
about adding more services for the sake of it. It’s financial crisis is one of the industry’s most valuable third parties given access to personal data are
about knowing your customers and making their assets, putting clear blue water between too-big-to- accountable, face reviews and audits once data is
lives better, day in, day out. This comes down to fail incumbents and unproven challengers. Indeed, received, and that there are consistent standards
sweating customer data so it yields insights that with just months to go until PSD2 is due to come into and obligations among participants. The industry
add real value, not just in how they manage their force, surveys suggest it is consumer trust that will clearly fears the introduction of unregulated
finances but in how customers manage their lives. cushion incumbents from the sharper edges of open third parties introducing vulnerabilities into the
banking’s competitive Thunderdome: according to payments chain, putting customers and hard-
Right now, incumbents have a head start because one survey, two-thirds of consumers in the UK said earned reputations at risk: only 36 per cent of our
they hold vast treasuries of customer data. The era they won’t share their personal financial data with respondents expect currently-unregulated third
of open banking, which makes it easy for customers 71% agreed that the vast stores of third-party providers and more than half said they parties accessing customer accounts via open APIs
will never change their existing banking habits and to be brought within the scope of financial services
to give third parties access to that data, and the customer data held by banks will become
General Data Protection Regulation, which gives adopt open banking5. regulation within two years.
less of a competitive advantage.
them the right to deny storage of it, explains why 71
This trust advantage is, perhaps, the banking
per cent of our respondents believe this headstart

46%
industry’s most potent weapon when it comes
will now be eroded. Instead the advantage will
to protecting its market share. Yet there are valid believe banks are significantly
lie with those that can use the data of the newly
worries that open APIs now jeopardise this: our
empowered customer to generate meaningful underprepared for the increased security
report last year found that nine out of ten banking
insights and deliver compelling new products and challenges posed by open APIs
executives believe open APIs will increase the risk
services – thereby gaining access to yet more data to
of banks’ security defences being breached6. These
further rocket fuel their proposition. fears are shared by the a significant proportion
of this year's cohort, with 46 per cent agreeing
Virtually all (95 per cent) our respondents agreed that banks are significantly underprepared for the
that analytical capability will become more
critical to competitive advantage in banking once
consumers can more easily pick and choose who 95% agreed that analytical capability
increased security challenges posed by open APIs.
36% expect currently-unregulated
There are also worries that open APIs, by introducing third parties accessing customer accounts
can hold and access data about them. This presents will become more critical to competitive third parties into the customer journey, will give via open APIs to be brought within the
a challenge for incumbents, whose sophistication advantage in banking once consumers rise to increased fraud. The Canadian Bankers scope of financial services regulation within
in analytics is generally weaker than that of either Association (CBA) has pointed to the potential
can more easily pick and choose who 2 years
FinTech new entrants or, for that matter, the digital impact of open APIs on banking fraud risk, including
titans, such as Amazon and Google, who seem likely can hold and access data about them. possible account takeover by third parties and the
to be eyeing the platform banking space. challenges of managing fraud once banks lose direct
access to customer transaction and device data. Our
respondents agree: 69 per cent believe that, as open 69% believe that as open APIs
New risks APIs facilitate the disintermediation of banks by facilitate the disintermediation of banks
unregulated players, it will become more difficult for
by unregulated players, it will become
Another competitive advantage for banks that could come under threat due to open APIs is trust. Banks may the industry as a whole to prevent banking fraud.
have been under fire for the decade following the financial crisis but when it comes to security they remain a more difficult for the industry as a whole
trusted partner in the eyes of most customers. According to one global study, 93 per cent of customers trust to prevent banking fraud
banks to keep their money safe3 while another found 83 per cent of customers trust their bank with their
data4, far ahead of trust levels in other organisations – and that includes potential new rivals in the form of
alternative payment providers (49 per cent), e-commerce firms (29 per cent), social networking sites (nine
per cent) and FinTech firms (six per cent).

Global Consumer Banking Survey, 2016, EY

3
Open Banking Survey, Accenture UK, October 2017
5

The Currency of Trust, report by Capgemini, 2017

4
The Future of Retail Banking 2016, Marketforce
6

10 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 11

 Banking laggards could miss API profits boost Salesforce Viewpoint

The banking industry stands on the cusp of unprecedented change. Incumbent banks have never
55% think APIs will have a positive effect faced anything as disruptive as Open Banking and PSD2: it’s not just another set of regulations and
it’s not about compliance-as-usual.
on their organisations’ profitability
Open Banking and PSD2 will open the “data safebox” of the banks potentially putting at risk their most
valuable assets: their relationships with their customers. Analysis suggests that a significant portion of UK
banking customers are willing, in some cases even extremely so, to share banking data with other banks
and even non-financial technology companies. Interestingly that percentage almost doubles for those
Although open APIs pose a number of threats, from fierce new competition, potential disintermediation
and weakened security, our respondents remain optimistic that new opportunities will outweigh these premier/ affluent customers.
downsides: on balance, over half (55 per cent) think APIs will have a positive effect on their organisations’
profitability. This is much more than "API-ification", or a levelling of the playing field for new entrants – or even keeping
pace with yet another disruptive technology. The implications represent a massive shift in the FinServ
Yet, at time of writing, with a little over two months to go, it seems the industry is still scrambling to Ecosystem and what it means to be a bank. There are big decisions ahead.
be PSD2-ready: three-quarters of our respondents think fewer than half of banks will be ready for the
February 2018 deadline. Some commentators suggest the deadline is likely to be extended to 2019, as the Incumbent banks need to decide whether to be a commodity player, providing back-end utility services
European Banking Association’s Regulatory Technical Standards (RTS) have not yet been adopted by the EU behind an aggregated portal run by a FinTech or any company playing a Third Party Provider role that
Commission. Incumbent banks must hope they are right. disintermediates them, or whether to play the disruptors at their own game and seek to retain customer
engagement, creating new kinds of added value services and customer experiences by orchestrating a
portfolio of third-party products and services.

Open banking and PSD2 open a new world of revenue-generating opportunities for those banks that can
create compelling data-driven propositions and partner with the best of FinTech to deliver smart money
management tools and other rewards. Indeed, in stretching to meet customer needs, banks could find
they move outside their financial services comfort zone. This represents profound change in the customer
relationship, from one that is purely transactional towards something much more like a partnership. In the
future, banking will not be about providing loans or other financial products but rather stitching together
third party offers to create a compelling ecosystem in which the bank is increasingly woven into the fabric
of a customer’s daily life.

Banks have talked about customer-centricity for years. Post-PSD2 they will need to deliver on their
promises or they will lose ownership of the customer relationship. Banks must act now and invest in best-
in-class customer engagement and relationship management solutions that can engage customers in new
ways and leverage the opportunities that PSD2 and Open Banking may bring.

Salesforce, the global CRM leader, enables companies to connect to their

customers in a whole new way. With its innovative Customer Success Platform,
Salesforce sets the global standard for customer relationship management,
engagement, and intelligence by integrating sales, service, marketing,
community, analytics, IoT, and app development in a trusted cloud for
businesses of every size and industry.
www.salesforce.com
12 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 13
 Bank of the Future
Most people have a longer relationship with their bank than their spouse: account holders typically stay put
for 17 years while the average British marriage lasts just 11 years and six months. And it tends to be a family
affair: almost three in five 18 to 24-year-olds bank where their parents do – and a fifth of people never move
from the account they have as a youngster7. This customer inertia has helped today’s big banks become,
well, big: in 2010 the four biggest banks in the UK held 77 per cent share of the current account market.

Regulators judged this level of market concentration was bad for customers and in 2013 the Bank of England
introduced new rules that simplified the process for acquiring a banking licence and lowered the capital
requirements for new bank entrants. The result? Within three years of the new rules, officials had approved
14 new banks and 20 more were in talks.

UK regulators also created the Current Account

Switching Service (CASS) in 2013 to enliven
competition and reduce inertia by making switching
easier; however, uptake remains worryingly low,
with just 4.2 million switches since the launch,
representing just six per cent of the more than
70 million active current accounts in the UK8. On
average just three per cent of UK current account
holders move banks a year, with many of those
customers switching between the big four, which still
retain well over 70 per cent of the current account
market. Our respondents feel CASS has done little 63% say customer apathy is the principal
to end the problem at the heart of the matter, with reason the Current Account Switching
63 per cent pointing to customer apathy as the very Service failed to take off
reason the service has failed to take off.
Indeed many customers believe their “free” current
This is despite the fact the Competition & Markets account is good value – not recognising that if
Authority investigation concluded “a substantial they stray into the red the charges can be very
proportion of customers are paying above-average high. The UK Competitions and Markets Authority
prices for below-average service quality” and that investigation had considered mandating an end
90 per cent would gain financially by switching to to free-if-in-credit banking but ultimately decided

Chapter 2: a cheaper product, with annual savings ranging

from £92 to £564 depending on usage and type of
account9. While there are several reasons customers
to take no action on this issue, much to the
disappointment of many new market entrants.
However, the UK Financial Conduct Authority has
Bank of the Future don’t switch, principal among them is that over half
think it will be a hassle to switch. Over half also do
signalled its intention to look at how banks cross-
subsidise the cost of current accounts as part of its
not incur any direct charges and thus are unlikely to strategic review of retail banking, which is due to
see any differentiation between products10. report in the middle of 2018.
Sponsored by:

7
Statistics from the Payments Council, 2013
8
Sources: CMA Final Report 2016; Who are You Calling a Challenger? Report by PwC; BACs press release October 2017
9
Retail Banking Market Investigation, CMA, 2016
10
Retail Banking Market Investigation, CMA, 2016

14 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 15

 The end of the cross-subsidisation model?
Banks cover the costs of fee-free current accounts through a combination of approaches: paying low rates of
interest on balances in credit; charging (often high) overdraft charges and other ancillary charges; and cross-
selling higher margin products. Irrespective of any regulatory action, this cross-subsidisation model may 53% think the end of free-if-in-credit accounts would be beneficial for customers
soon run out of steam.
Our respondents are split on this issue: just over half (53 per cent) think the end of free-if-in-credit accounts
The customer behaviours that sustained cross-subsidisation are disappearing in a digital world. As was would be beneficial for customers, 28 per cent think the effect would be negative and 19 per cent believe it
observed in last year’s report, growing use of search engines to choose financial products is diminishing would make no difference to the majority of consumers.
the influence of a customer’s own bank, resulting in a more fragmented financial services market11. Quite
simply, today’s connected customers are more informed about their choices – and are prepared to shop
around for a better deal on home insurance or investment products. Expanding consumer choice
New regulation seeks to encourage this pick-and-mix approach. First, the open banking agenda could see What is undoubtedly of benefit to consumers, to ensure it understands what really matters to
banks cede control of the customer interface to third parties, reducing the scope to up-sell to subsidise low- however, is choice - and that choice is expanding customers, while Monzo issues new functionality
margin current accounts. exponentially. New mobile-first entrants with and modifies its existing service almost every day
innovative customer-focused solutions are showing in direct response to how it is being used and what
Second, new platforms set up as Account Information Service Providers (AISPs) under PSD2 will add value customers new ways to manage their finances, be it customers say about it. Indeed, when it comes to
to their customers by pointing to better deals, nudging those paying high overdraft charges or receiving friction-free savings with Plum or smarter budgeting disruptive innovation in banking, surveys show it is
little interest on large account balances into action. There’s a clear consumer appetite for such services, one with SimpleBank. And these new contenders are GAFA and FinTech start-ups that are expected to take
survey asked consumers to pick between two ideal banking scenarios and found the majority preferred to already making headway: one 2016 report found the lead, with just one third backing the innovation
bank with multiple providers to get the best offers rather than stick with a single bank12. half of banking customers around the world were credentials of existing banks14.
already using the products or services of at least
one FinTech firm13.
The dying days of “free-if-in-credit”
Exposure to FinTech will reshape customer
These trends mean the cross-subsidisation model expectations of what is possible in financial services
is on borrowed time. Our surveyed banks certainly and that banks can meet the customer service bar
expect to overhaul their pricing and value models set by the digital titans – Google, Amazon, Facebook
over the next decade: more than half (63 per cent) and Apple (GAFA). SimpleBank can onboard
expect to see the end of free-if-in-credit banking customers in three minutes, provides fee-free
within the next five years, rising to 80 per cent in banking along with smart budgeting tools and an
ten years. automatic saving feature to help customers meet
their financial goals. Starling Bank is also designed
However, the jury is out in terms of the benefits of to give customers control of their finances, with
this for the customer. On the one hand, free current real-time updates on spending and analytics to
accounts can stifle competition by making it difficult help customers understand their spending habits.
for new entrants to compete on price and they allow And like GAFA, the digital-only entrants prize
banks to exploit customers’ behavioural biases, 63% expect to see the end of free-if-in- customer feedback and constant iteration to keep
leading to higher prices on the other products credit banking within the next five years the offer fresh, relevant and, eventually, make it
they offer. On the other hand, it can be argued that indispensable to daily life: Atom Bank, for example, Digital new entrants expected to take 21%
the “free-if-in credit” pricing model is actually the uses the Reevoo customer feedback platform to ask
market share in Europe in the next five years
product of competition and that it would be a pyrrhic victory for many customers to have to start paying for specific questions about the experiences it provides
a service they currently receive free of charge.

11
In The Future of Retail Banking 2016, nine out of ten expected increased use of search engines to research products to result in a more
fragmented financial services market in which customers will have relationships with a wider variety of institutions. World FinTech Report 2017 (WFTR), Capgemini, LinkedIn and Efma
13

12
PwC/YouGov, January 2017 Research by Efma/Infosys in 2017, found just 34% expect traditional banks to be a significant threat in terms of disruptive innovation.
14

16 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 17

 Amazon in banking
Incumbents recognise the threat posed by these customer-obsessed start-ups: on average our respondents Amazon, the online retail juggernaut, has the kind of over 20,000 small businesses, more than 50 per cent
expect digital new entrants to have taken a 21 per cent market share in their country in just five years’ time. customer reach banks can only dream of: four out of of which end up taking a second loan. Privy to much
This percentage might be higher were it not for a recognition among both incumbents and fintechs that the every US$10 spent online in the US is with Amazon, of the sales of these businesses, Amazon is ideally
future relationship between them is often likely to be one of collaboration rather than hand-to-hand combat giving it a 43 per cent share of e-commerce17. What’s placed to judge the credit risk19.
for market share. As the World Economic Forum found in its 2016 report15, many fintechs that originally more, a huge number of those customers are
aimed to take market share from incumbents have shifted to building partnerships as they have struggled happy to sign up to a subscription service, Amazon Given the vast reams of data it similarly amasses
with scale and customer adoption. Retail FX platform, Transferwise, for example, originally branded itself Prime, paying a monthly fee that not only generates on its consumer customer base, Amazon would
as an alternative to high bank fees but in recent years has begun to work with select banks to expand its subscription revenues for the NASDAQ-quoted be equally well placed to lend in that market.
customer base, while New York–based neobank Moven and Canada’s TD Bank have partnered to integrate heavyweight but also converts those customers It therefore seems inevitable that Amazon will
Moven’s mobile financial-management tools with TD’s Internet-banking platform in Canada. into high spenders: with an estimated 90 million eventually offer revolving credit lines for Prime
subscribers, almost two-thirds of households in the members, of which take-up could be rapid as the
US are now Amazon Prime members and they spend voice-activated payments market expands, given
The threat of GAFA on average nearly US$1,300 a year compared to
US$700 for non-Prime shoppers18.
the company’s dominant position in the smart
speaker space.
But there is one looming competitive threat that keeps bankers awake at night. Many fear the intentions of
the tech giants (Google, Apple, Facebook and Amazon, or GAFA), which, given their size, their vast treasuries Amazon is not a bank - but many believe it is Amazon is capital-rich and has already shown a
starting to look like one. With Amazon Pay, the willingness to take risk outside its core business:
of customer data and a proven capacity to innovate at speed could quickly capture significant market share.
e-commerce giant introduced an easy and secure witness its summer 2017 US$13.7 billion acquisition
One survey of UK consumers revealed that more than a third (36%) would consider switching to GAFA
way for consumers to make frictionless, one-click of grocery retailer Whole Foods, the award-winning
companies if they were to offer retail banking services (rising to half among 25 - 34 year olds), of whom 41
online payments and for merchants to accept them. original content from Amazon Studios and its
per cent cited GAFA’s capacity to offer better technology and 40 per cent the potential for more innovative
Amazon has now built out this capability to allow cloud-based computing business, Amazon Web
products and services16.
customers to make convenient payments in-store, Services, which provides services to dozens of
having ordered ahead using the Amazon app. This finance companies. The early months of 2017 saw
Among our respondents, 83 per cent expect Amazon - which they see as the strongest contender among the new service, Amazon Pay Places, was launched in the rumour mills alive with chatter that Amazon
GAFA digital titans – to hit the banking mainstream within the next ten years, and 66 per cent expect this to summer 2017, with the restaurant chain TGI Fridays might be about to acquire US bank Capital One. Nine
happen within the next five years. Google, comes in a close second, with 83 per cent foreseeing it achieving the first merchant to accept the payment option. As months on and no deal has been announced but few
mainstream banking success within a 10 year timeframe and 62 per cent within five years. the service is rolled out, consumers will be alerted doubt that Amazon will make further inroads into
to a retailer’s participation as soon as they enter the the banking space, and its ultimate impact could be
store, encouraging them to build on their existing an Uber-style disruption.
How soon do you expect GAFA to achieve Within Within habit of using the Amazon app for purchases.
mainstream banking success in your country? five years 10 years
Amazon Top Up (or Amazon Cash as it is called in Google, Apple and
Amazon 66% 83%
the US) gives customers the opportunity to add cash
to their Amazon accounts – including topping up at Facebook in payments
selected bricks-and-mortar stores - and the ability
to earn rewards on their balance, essentially giving Like Amazon, Google, Apple and Facebook have all
Google 62% 83% these users a banking account. moved into the payments space.

In addition to consumer payments and deposits, Google’s signature style of balancing impactful
Apple 58% 78% Amazon has a thriving SME lending business. The innovation with continuous iterations has been
firm paid out over US$1 billion in small loans in the at work with the development of its payments
last year. Amazon said in June 2017 that its Amazon service. First came Google Wallet, which now
Facebook 48% 65% Lending service had surpassed a total US$3 billion in essentially functions as a peer-to-peer payment
loans across the US, UK, Europe and Japan, serving system20, then Android Pay21, which allows a
17
https://www.forbes.com/sites/shephyken/2017/06/17/sixty-four-percent-of-u-s-households-have-amazon-prime/#1377b5104586
18
Consumer Intelligence Research Partners (CIRP), October 2017
15
Beyond Fintech: How the Successes and Failures of New Entrants are Reshaping the Financial System, World Economic 19
Business Wire, 2017
Forum, August 2016. 20
https://gizmodo.com/android-pay-vs-google-wallet-whats-the-difference-1707696252
16
Research: Retail Banking IT, Peru Consulting 21
http://www.techadvisor.co.uk/feature/google-android/android-pay-guide-what-is-android-pay-which-banks-support-android-pay-3614541/
18 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 19
 Specialisation – the way ahead?
user to add payment cards and make in-app and tap-to-pay payments, and now Pay with Google, which It will be hard for banks to compete with the tech titans for the customer’s attention. Google, Apple and
enables users to pay with any card they have on file with Google, rather than just those saved to Android Amazon are ranked as the three leading brands in the world. Even the lowest placed of the quadruplet,
Pay22. The company is also beta testing Purchases on Google, an innovation that enables advertisers to Facebook, comes in at number nine, ahead of ICBC of China, Wells Fargo and China Construction Bank,
highlight their shopping ads with a blue “Buy on Google” button. This will make it easier for consumers to the only banks to make the top 2027. When it comes to brand recognition and customer engagement,
buy products directly from mobile search ads by giving them the option to use their linked Google Wallet. today’s high street banks are no match for the power of GAFA.
It’s also worth noting that internet giant Baidu, often known as China’s Google, in August 2017 got the
greenlight for its joint venture with Citic Bank to launch an AI-powered online bank, aiBank - a signal of It might be smarter for incumbent banks to avoid a head-to-head fight altogether. And it seems the
what Google could do in the banking space if it were to be so minded. Baidu has also been offering its own industry is losing an appetite for big brand banking: last year 64 per cent of our respondents forecast
investment funds for some time, including a RMB 3 million big-data based mutual fund, which sold out that, as customers increasingly expect services tailored to their specific needs, most banks will launch
within 3 days of launch in 2014. niche subsidiaries28.

Apple already lets you use your iPhone as a bank card on the high street. The technology giant has also
New entrants certainly see the sense of this:
added the ability to pay money to friends using iMessage so that users don’t need to bother with sort
Monzo focuses on Millennials, Shawbrook and
codes or account numbers. And Apple’s person-to-person payment doesn’t just put your money in your
bank account; it allows you to hold it on your “Apple Card” for future spending. CivilisedBank on SMEs and Hampden & Co on
the mass affluent. Incumbents are also launching
Facebook first began processing payments in 2007 for game players and advertisers. Today, it enables their own niche offers: Unicredit has launched
users in the US to send peer-to-peer payments over the Messenger app23, which has over 1.3 billion buddybank for smartphone users, Santander’s
users globally. The social media titan looks set to expand its payments services to Europe in the near digital bank is called Open Bank, BNP Paribas’ call
future – late in 2016 it acquired an e-money licence in Ireland24. It is also building out the payments to Millennials is Hello bank! while ING’s money app
options available, having added the ability to send money within a group, which facilitates the splitting Yolt allows customers to view all their UK accounts
of restaurants bills, for example25. And through a partnership with Transferwise, Facebook now provides and credit cards in one place. And in October 2017,
international money transfers. 80% believe that within five years the banking behemoth JPMorgan Chase launched its
majority banks will be forced to specialise own Millennial-focused app-only bank, Finn, which
GAFA post PSD2 in serving more specific needs and market comes with smart budgeting tools, autosaving
features and the ability to use emojis to rate
segments in order to remain profitable
The threat posed by GAFA will only become more which customers just can’t get enough. Quite simply, transactions and purchases bought using the app.
potent post-PSD2. It’s likely that every member of a bank that isn’t worried is one that hasn’t fully
the GAFA group will set up as a Payment Initiation understood the threat. Such niche subsidiaries are a way for large players, with cumbersome infrastructure and conservative
Service Provider, allowing them to handle their attitudes, to innovate with products and service without putting the whole brand on the line. They are
own payment processing and avoid the fees they There is a very real risk of today’s banks becoming also a way to carve out profitable niches to act as a buffer against disintermediation: according to this
currently pay to card acquirers. And these hugely the dumb pipes that provide the back-end year’s survey findings, four out of five bankers (80 per cent) believe that within five years the majority of
successful platform businesses are also well-placed infrastructure to the consumer-facing Banks of banks will be forced to specialise in serving more specific needs and market segments in order to remain
to set up as AISPs, using open APIs to plug into the Amazon, Google, Apple or Facebook. And, typically, profitable. 64 per cent believe this will be true among the large retail banks specifically, rising to 93 per
banks’ customer data stores in order to provide GAFA are homing in on the profitable end of the cent when considering a ten year time frame. Only by specialising will banks be able to deliver the kind of
portals that allow customers to access all their pipe: according to research by McKinsey, it’s the customer-obsessed innovation that powers GAFA – and it is this that will enable them to punch above their
banking and financial accounts in one place. distribution side of banking that generates the bulk weight in the coming battle for the customer interface.
of the profits, with an ROE of 20 per cent compared
This represents an existential-level threat to the to an ROE of just 4.4 per cent for the core business of
banks. The GAFA firms have unparalleled user financing and lending26. Those that have not already
numbers, vast data stores, powerful brands and developed a strategy to combat this threat may
the technological know-how – including cloud already be too late.
computing, AI and advanced analytics - to leverage
all of this into the kind of innovative propositions of 26
In Remaking the Bank for An Ecosystem World, October 2017, McKinsey reports that “manufacturing”—the core businesses of financing
and lending that pivot off the bank’s balance sheet—generated 53.0 percent of industry revenues, but only 35.0 percent of profits, with an
22
https://techcrunch.com/2017/10/23/pay-with-google-goes-live-allowing-mobile-users-to-pay-with-any-card-on-file-not-just-those-in-android-pay/ ROE of 4.4 percent. “Distribution,” on the other hand—the origination and sales side of banking—produced 47 percent of revenues and 65
23
https://www.bigcommerce.co.uk/ecommerce-answers/what-are-facebook-payments/ percent of profits, with an ROE of 20 percent.
24
http://uk.businessinsider.com/facebook-quietly-secures-an-e-money-license-in-ireland-2016-12 27
Top 500 global brands, Brand Finance, 2017
25
https://www.forbes.com/sites/kathleenchaykowski/2017/04/11/messenger-debuts-group-payments/#73d3cd273a80 28
The Future of Retail Banking 2016

20 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 21

 Infosys Finacle Viewpoint

Disruption moves fast. And banks still acclimatising to the pace of our smartphone, app-
addicted world, need to brace themselves for a further acceleration. Google, Apple, Facebook
and Amazon have a devastating talent for disruption, leveraging data know-how and brand-
smarts to rapidly build platform businesses that transcend industry boundaries. Meanwhile,
social media and the tech giants of the east are a phenomenon of their own device - from

Chapter 3:
messaging apps to mobile payments, from livestreaming to on-demand transport, China’s WeChat
and Alibaba are deeply integrated in the daily lives of the people of China and are already making
strides towards the west.

Incumbent banks need to think like these tech titans in order to create an effective response.
This means looking at the customer and working out how to make their life better, healthier
and wealthier. It’s not about selling a current account, mortgage or savings account; it’s about
The Next Phase of
supporting the customer to manage their money better, to move house with minimum fuss or the Technology
to enjoy their retirement. Banking is no longer about financial products; it’s about journeys,
and supporting the customer every step of the way. It’s not a different set of processes; it’s a Revolution
different mindset.

This will be a challenge for many incumbents. Finacle research states about one in ten banks
Sponsored by:
have fully embraced the innovation agenda, and are preparing to wow their customers by acting
as distributors of best-in-class Fintech solutions. These front runners are more than ready to
compete against their tech giant peers, be it GAFA or WeChat. Others are moving in the right
direction but risk being overtaken by a tidal wave of disruption post-PSD2. And then although
a minority, there are a significant number of banks adopting the myopic view of simply being
“more digital” in the way they approach their customers, failing to realise the bigger picture their
competition is moving towards - it’s not about channels, it’s about creating ecosystems that
customers find they can’t live without.

The good news is that you don’t need to spend huge amounts of money to make solid gains.
Banks simply need to get going with thought-through initiatives, constantly experiment, be willing
to fail fast and learn from mistakes, learn from wins, pilot everything and get real-world feedback.
It will take bold leadership, talented people and an appetite for innovation and improvement.
Some will get there, many won’t. There will be big winners, and big losers – some household
names will disappear in the next five years. Those that survive will be the Banks of the Future,
banks that will look very different from the banks of today. And we think that’s a good thing.

Finacle is the industry-leading universal banking solution from EdgeVerve

Systems, a wholly owned subsidiary of Infosys. The solution helps financial
institutions develop deeper connections with stakeholders, power continuous
innovation and accelerate growth in the digital world. Today, Finacle is the
choice of banks across 94 countries and serves over 848 million customers –
estimated to be nearly 16.5 percent of the world’s adult banked population.
www.finacle.com

22 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 23

 Artificial Intelligence: smarter, faster
The Next Phase of the
Technology Revolution Artificial Intelligence – computing systems that can engage in human-like thought processes such as
learning, reasoning and self-correction - is no longer science fiction; it’s 2017 reality. Customers today
routinely interact with AI-powered agents, be they virtual assistants or chatbots that smooth our retail
experiences, acting as a gateway to further acceptance of smart machines in the fabric of daily life. Behind
The last 30 years have seen rapid technological As 4IR starts to takes hold in banking, four main the scenes, the algorithms are increasingly crunching through vast data sets – faster than any human could
match – to generate unprecedented insights that drive better decision making, be it identifying attempted
change. From the birth of the World Wide Web in technologies will drive change – artificial intelligence
frauds faster, spotting a previously unknown credit risk or anticipating a customer’s future requirements to
1990 to the mass adoption of smartphones and (AI), robotics process automation (RPA), the Internet
iron out service wrinkles and improve cross-selling.
cloud computing to the global babble of social of Things (IoT) and blockchain. Each technology has
media, today’s world is faster, richer and more its own disruptive potential. Combined, their effect Frontrunners are already reporting impressive
connected than at any time in human history. Yet will be to change not just the face or composition of results. To cut down on loan-servicing mistakes, JP 51% say their organisation
today we stand on the precipice of a technological the banking industry but its very role and utility. Morgan launched its COIN (contract intelligence) will be making significant
revolution far greater than any in living memory. programme. This machine learning technology investment in AI-driven
What has become known as the 4th Industrial As the deployment of these technologies goes is used to review and interpret commercial loan analytics in the next three
Revolution (4IR) promises to transform society, and mainstream, they will act as an accelerant to further agreements and is capable of cutting an estimated years – more than in any
banking with it. innovation and disruption. Indeed, if we were to 360,000 hours of human work done by lawyers and of the other disruptive
fast forward another 20 years we may not even be financial loan officers. Meanwhile, RBS has adopted technologies.
4IR – also referred to as Industry 4.0 – is able to recognise the bank of the future, as smart a cognitive chat bot, powered by IBM Watson
characterised by the blurring of cyber, physical machines, making inferences and predictions based Conversation, with the aim to help customers quickly and simply with their queries and problems30.
and biological networks to create intelligent and on previously incalculable data sets, set course
Over half (51 per cent) of our respondents say their organisation will be making significant investment in AI-
autonomous systems. It portends man and machine for previously unimaginable destinations: in one
driven analytics in the next three years – more than in any of the other disruptive technologies.
working alongside each other and machines study 93 per cent of senior executives forecast
talking to machines (M2M) to continuously refine that machine learning will enable organisations to For now, the main uses of AI-driven analytics are fraud detection (35 per cent), to guide customers through
their operations without human input. Some of identify currently unimagined diversification and a process (26 per cent) and credit assessment (20 per cent). In just five years, however, the technology is
the precursors of those concepts are here today: partnership opportunities29. expected to be mainstream, with the overwhelming majority using AI-driven analytics to help customers
consider virtual personal assistants such as Siri or self-serve, improve pricing and personalisation, measure workforce productivity and allocate work. 62 per
Alexa, deep learning algorithms and self-driving cars. cent even expect to use AI to design new products within five years.

The level of investment expected to be made in each of the following technologies over the next 3 years: Popular use-cases for AI in banking
Already make extensive use expect to do so within 5 years
100
35% 31% 26% 20% 15%
98% 90% 94% 95% 88%
significant investment
80 moderate investment

60

for fraud detection for chatbots for automated guidance to help for credit risk for operational risk
customers through a process assessment management
40
13% 11% 10% 6% 6%
92% 87% 84% 80% 62%

20

0
AI-driven Robotic Process Internet of Blockhain
analytics Automation Things for personalisation for pricing for measuring workforce for allocation of work to most for designing new
productivity appropriate staff member products

29
The Future of Customer Analytics: the Path to Improved ROI, Sopra Steria/Marketforce, 2017
Case study cited by McKinsey https://www.mckinsey.com/industries/financial-services/our-insights/analytics-in-banking-time-to-realize-the-value
30

24 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 25

 As smart machines hit their stride, learning and self-correcting as they’re exposed to more and more of Banks, with their intensive data-inputting and
the business, the compelling cost benefits and superior customer experience will open up clear blue water compliance requirements, are ripe for this kind of
between the AI-haves and have-nots. Indeed, the race to capitalise on AI-powered learnings means many automation. Investment banking giant BNY Mellon
bankers believe this technology will become critical within a decade: one survey found seven out of ten has reported that RPA has delivered 100 per cent
bankers think machine learning will become the most powerful way to win the banking customer over the accuracy in account-closure validations across
next five years and 86 per cent believe intelligent, self-improving algorithms will be the core of banking five systems and an 88 percent improvement in
services by 202531. processing times, while its “funds transfer bots”,
by reducing the time employees spend processing 81% are either already using RPA or are
Our survey shows AI-driven analytics as likely to be the most disruptive technology in banking in the next payments and resolving data errors, are alone
five years. responsible for US$300,000 in annual savings. in the planning stages to unleash it

Many industry observers predict RPA will trigger a

What technology will have the biggest What technology will have the biggest
fundamental shift in banks’ operating models in by
impact in the next five years? impact in the next ten years?
2019. In fact, it is estimated that process automation
will change up to 25% of work in banking35.
AI-driven analytics 30% Robotic Process Automation 37%
Banks are investing accordingly: 81 per cent of those
Blockchain 30% Internet of Things 28% we surveyed are either already using RPA or are in the 41% expect to make a significant
planning stages to unleash it. 41 per cent expect their investment in RPA in the next 3 years
Internet of Things 24% Blockchain 19% organisation to make a significant investment in RPA
in the next three years. And they expect the impact
Robotic Process Automation 15% AI-driven analytics 16%
to be transformative across many areas of operation.
Perhaps most significantly, 85 per cent agreed RPA

The (software) robots are coming will bring about a step change in lifting the data
re-inputting burden caused by legacy systems.
Accordingly, 75 per cent believe it has significant
Taking a longer-term view across a 10-year timeframe, our survey indicates Robotic Process Automation is
potential to overcome data silo problems.
the technology set to most fundamentally disrupt banking. 75% believe RPA has significant potential
to overcome data silo problems
It is not new to make bleak assessments about the impact of automation on jobs. One study suggests about
half of all the activities people are paid to do in the world’s workforce could potentially be automated
by adapting currently demonstrated technologies – that’s equivalent to almost US$15 trillion in wages32.
However, many believe automation won’t displace humans from the workforce but free them from
repetitive tasks to focus on higher value jobs that require human judgment and empathy. Percentage who think RPA has significant potential across different functions

RPA will be at the forefront of this workplace revolution. RPA doesn’t involve humanoid robots but rather Cutting operational costs 87%
computer software that organisations configure to capture and interpret the actions of existing business
process applications, such as compliance checks or customer support. Once the “robot software” Automatic transfer of data between incompatible systems, thus
85%
understands these, it can take over the running of them – and it does so more far more quickly, accurately eliminating the need for repetitive manual inputting
and tirelessly than any human. Studies by the London School of Economics suggest RPA can deliver a
potential return on investment of between 30 and 200 per cent - and that’s just in the first year33. Savings on
Decreasing response times to customers 83%
this scale will prove hard to resist: last year Deloitte found while only nine per cent of surveyed companies
Lifting the administrative burden on customer experience agents 79%
had implemented RPA, almost 74 per cent planned to investigate the technology in the next 12 months34.
31
The Role of Analytics in the New Banking Age, Earnix/Marketforce, February 2017 Overcoming data silo problems 75%
31
McKinsey Global Institute, January 2017
33
Leslie Willcocks, professor of technology, work, and globalization at the London School of Economics’ department of management.
Source: McKinsey.com, December 2016
34
The Robots are Here: meet your digital workforce, Deloitte, 2016 IBM, 2016 https://www.ibm.com/blogs/insights-on-business/business-process-services/2016/10/11/banking-rpa/
35

26 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 27

 68% Indeed, the bottom-line benefits are expected to While our surveyed banks may be pacing their investment, there’s clear consensus that blockchain
92%
be so material that RPA will nullify the business technology could streamline and improve many aspects of their operations. A substantial majority of
case for business process outsourcing. With these respondents think it offers significant potential for each of the following use cases:
tools 65 per cent less expensive than full-time
employees, over half of our surveyed banks expect
to significantly reduce BPO within the next three 79% 75% 75% 72% 72%
years, rising to 68 per cent in five years36. More than 66%
nine out of ten (92 per cent) expect that, as RPA 59%
drives down administrative costs, call centres will be
68% expect to significantly reduce BPO within
increasingly located onshore.
five years… and 92% expect call centres to be
increasingly located onshore
And RPA isn’t just a back-office workhorse, displacing
humans from the workplace. In common with other
reports, our findings predict RPA to augment rather
than replace the human worker, with 82 per cent Instant and more Enabling consumers to Simplifying the Making data more Reducing the cost Making IoT-activated Lifting the burden
cost-effective provide permissioned trade finance easily accessible and timeframe of micropayments more of regulatory
believing the technology will enable call centre staff payment access to their personal process across the business the KYC process cost efficient reporting
to much better engage with customers. information and digital
identity

82% believe RPA will enable call centre staff to In May 2017, Santander announced it had started a
much better engage with customers pilot programme among 6,000 staff to use blockchain
to record international payments, and might start
rolling out the service to customers in 2018. Its aim is 80%
expect blockchain to

Blockchain: experimenting with a potential to make the transfer of money faster, more accurate
and more transparent. Santander estimates that
significantly increase the speed and
efficiency of payments
game-changer the technology may eventually allow banks to settle
an estimated annual US$26 trillion of international
transactions almost instantaneously. That compares
Blockchain is similarly set to be an operational

20%
with settlement times of days under the current systems used by banks. Our research supports this, with
game-changer, having been described as the most
are already using blockchain 80 per cent of our respondents expecting blockchain to significantly increase the speed and efficiency of
significant technological development for the
payments.
financial services since the Internet37. A digitally- in pilot projects; a further 41% are at the
distributed ledger that allows users to record, planning stage
process and verify transactions, blockchain is
expected to streamline the back office, slashing
The potential of permissioned access to an
transfer times to seconds rather than days and immutable ledger
saving billions in settlement, regulatory and cross-
border payment costs.
59% expect to make only
The fact that distributed ledgers are immutable and can be accessed on a permissioned basis means data
moderate or minimal investment in can be transferred quickly and securely, answering many of the security and regulatory conundrums that
Last year, over half our respondents admitted they blockchain over the next 3 years shadow this brave new digital world. In May 2017, UAE retail banking giant Emirates NBD launched the pilot
didn’t know anything about blockchain. Twelve phase of an initiative titled ‘Cheque Chain’, which leverages blockchain’s immutability to reduce cheque
months on and we find our 2017 cohort is engaging with this game-changing technology: one-in-five are fraud. The initial phase will see unique QR (Quick Response) codes on every leaf of a cheque book, which
already using blockchain in pilot projects and a further 41 per cent are at the planning stage. will be used to register each cheque on to the bank’s blockchain. This will allow the bank to validate a
cheque’s authenticity at all times, with access to its source even after the cheque is received and cleared. In
Investment in blockchain is still cautious, however, with 59 per cent expecting only moderate or minimal this way, the bank will be able to establish the authenticity of a cheque and validate it without any manual
levels of investment over the next three years, compared with just 22 per expecting their organisation to intervention, saving time and reducing risk.
invest significantly.
36
Finance and Accounting Outsourcing Annual Report, Everest Group, 2014
37
The Future of Retail Financial Services – A Global Study of Senior Insurance and Banking Executive by Cognizant, Marketforce and Pegasystems
28 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 29
 Internet of Things – a data bonanza?
Meanwhile leading Dutch bank ABN AMRO has launched a pilot to explore how the blockchain application Five years ago, organisations were scrambling to understand how IoT, with its network of smart devices and
"Torch" can allow parties involved in a mortgage transaction to seamlessly record and exchange embedded sensors generating unimaginable volumes of data, might present opportunities. So rapid are
information. The bank is also developing proofs of concept around how the blockchain could remove today’s innovation cycles, however, that today we find just one in five of our organisations expect to make
uncertainties in the estimation of collateral values. significant investments in IoT technology over the next three years, with the hype now focused instead on AI
and automation.
Over three quarters of our respondents believe
distributed ledger technology has significant
potential to enable consumers to provide
permissioned access to their personal information,
80% agree that blockchain-based
Increasingly, organisations understand that it is not the amount of data you capture that matters; it what
you do with it. But this isn’t the only reason that banks are pacing their investments: a number of issues,
from security38 to pricing points, privacy fears and a lack of standardisation, have meant that take-up of
smart contracts between importers and
while 73 per cent see the technology as a way connected devices has been slower than expected39.
exporters could dispense with the need for
to make data more easily accessible across the
business, unplugging bottlenecks in the new data trade finance altogether Even so, there’s no doubt that a hyperconnected world could yield a data bonanza for banks, providing
economy to improve operational performance real-time insights not just into a customer’s spending habits but where they go, how they behave and what
and deliver better customer experiences. And
increasingly onerous regulatory requirements 59% believe smart contracts held
matters most to them. This data can be used to generate a highly granular understanding of a customer to
improve credit assessments, fraud detection and generate powerful new and personalised offers that add
could also be lightened, with 59 per cent of our on blockchain could make IoT-activated real value to daily life. Indeed, as banks hoover up more data about their customers on a minute-by-minute
respondents backing blockchain to deliver a step micropayments more cost efficient basis, there’s the potential to step outside banking and offer services to help customers manage their lives,
change in regulatory reporting. not just their finances, more effectively.

It’s when blockchain is combined with smart contracts that the technology delivers its most transformative Among our respondents, it is wearables that are seen
results. By removing the need for a trusted third party, blockchain could revolutionise trade finance: four as the greatest potential data bonanza in the next
out of five of our respondents (80 per cent) agree that blockchain-based smart contracts between importers decade. Wearables have a clear tap-and-go payments
and exporters could dispense with the need for trade finance altogether. Already eight banks have become function, creating secure yet frictionless experiences
founding members of we.trade, a digital platform that utilises both distributed ledger technology and smart for customers on the go: in 2015 MasterCard made the
first biometrically authenticated wearable payment
contracts for managing, tracking and protecting trade transactions between SMEs.
using a customer’s heartbeat using the Nymi Band,
a wearable wristband that can track the wearer’s

67%
unique electrocardiogram to deliver continuous
believe smart contracts held on blockchain could make IoT-activated authentication experiences. But beyond payments,
50% expect to use data from wearable
there are many more use cases for wearables. Smart
micropayments more cost efficient devices for personalisation, fraud detection
Glasses, for example, can be used by bank tellers to
or credit assessment within five years
automatically identify and tag objects in real time,
and 83% within ten
providing frontline staff with additional checks
Another Dutch banking heavyweight, Rabobank, has partnered with Nexuslab, the Swiss blockchain startup to quickly identify fraudulent activity, such as the
programme powered by Startupbootcamp Fintech. Rabobank is looking at blockchain applications in four presentation of a fake cheque, while fitness trackers,
fields, one of which is micropayments via the Internet of Things (IoT). Some commentators predict that such as Fitbits and Jawbones, are opening up a new
more transactions could eventually pass through connected devices, such as smart fridges, connected realm of information for information-hungry lenders
cars and wearables, than through smartphones. With Visa and Mastercard creating much of the underlying keen to explore the correlation between conscientious
infrastructure, this market is beginning to take shape. In our survey last year, 81 per cent agreed that, as exercise habits and good financial discipline40.
the number of transactions triggered automatically by smart devices continues to grow, the current Wearables can also yield up the geolocation data that
approach to interchange fees will become unsustainable. Blockchain may well be the way ahead: two-thirds banks need to add value at point of payment, through
of our cohort believe smart contracts held on blockchain could make IoT-activated micropayments more real-time, personalised offers. This potential is not lost 13% expect to use data from smart homes
cost efficient. on our surveyed cohort: half expect to use data from in the next three years…
wearable devices for personalisation, fraud detection rising to 51% within five years and 72%
or credit assessment within five years and 83 per cent within ten
within ten.

38
A survey across a variety of industries by James Brehm & Associates found 64 per cent saw security as a barrier to IoT growth.
39
Internet of Things Business Index 2017, The Economist Intelligence Unit
40
Big Data: Credit Where Credit’s Due, Financial Times, 4 February 2015

30 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 31

 Data from smart homes will see slower take-up. Adoption of smart home kit has fallen short of expectations,
with customers deterred by costs and privacy issues. However, the astonishing success of Amazon’s
compellingly priced Echo and Echo Dot speakers, which can act as a hub to connect smart home gadgets, More than eight out of ten (81%) of our
could be the gateway to a smarter future. While many consumers just use Echo to play music, their growing respondents report it’s a struggle for their
familiarity with the convenience of voice-assisted technology could prompt further investment in gadgets organisation to handle unstructured data
and appliances that smooth out the petty inconveniences of life. This could generate huge reams of useful
data for banks, be it anticipating a customer’s future needs – a loan to replace a broken appliance – or
identity checks for anti-fraud purposes. While just 13 per cent of our respondents expect their organisation
to use data from smart homes in the next three years, this rises to 51 per cent within five years and 72 per The issues for many banks is that, in moving to take

55%
cent within ten years. advantage of new IoT data sources, they would be
inviting massive unstructured data growth. Many are already experimenting
Take-up of data from connected cars – those that are struggling to make use of their existing data sets, with machine learning to handle their
have access to the Internet and a variety of sensors never mind the torrent of machine-to-machine data,
unstructured data… a further 22% plan to
that allows them to send and receive signals, sense much of it difficult-to-interpret, unstructured images
and audio. More than eight out of ten (81 per cent) do so in the next two years
the physical environment and interact with other
vehicles or entities – is expected to be slower still. of our respondents report it’s a struggle for their
There are currently about 100 million connected organisation to handle unstructured data while in another survey of banking executives, three-quarters (76
vehicles around the world, and their numbers per cent) agreed that most banks lack the analytical capability to take full advantage of new data sources41.
are growing every year as auto-makers respond
to regulatory rules for safer driver systems and The good news is that another new technology offers a shortcut to overcoming the unstructured data
customer demand for 24/7 seamless connectivity. challenge: over half of our surveyed banks are already experimenting with machine learning to handle their
And the growth forecasts are spectacular: PwC is unstructured data and a further 22 per cent plan to use it for this purpose within the next two years.
predicting that this number will reach 470 million
6% expect to use data from connected
in 2025; Business Insider Intelligence believes it will
be 293 million by that time, while the consulting
cars in the next three years… Towards a better life for all
firm Gartner estimates that there will be 250 million ...rising to 26% within five and 62% within ten
connected cars in just two years. Like the industrial revolutions that preceded it, 4IR will bring upheaval, dislocation and disruption. It will
also deliver a giant leap forward in productivity and growth and power astonishing advances in, among
For now, this embedded connectivity is limited by drive-by-wire services and is used for on-the-go access others, health care, agriculture, transportation and clean energy. Banks should invest now to optimise their
to music, traffic alerts and navigation. Yet this is just the beginning: General Motors has combined its operations so they can make the most of new opportunities as they emerge and support their customers in
OnStar communication system with IBM’s AI-platform Watson to create OnStar Go, which learns the driver’s a changing world. These changes will be profound and companies, lawmakers and society at large should
preferences and habits to make time in the car more productive and enjoyable, including by providing now engage in meaningful debate about not only how to manage the potential risks of unchecked AI or
location-based restaurant recommendations, locating fuel stations, handling automated payments and mass automation but also how to leverage the power of these game-changing technologies to make life
placing and paying for coffee orders. better for all.

Despite the rapid development of the technology, our surveyed bankers expect their organisations to be
slow to adopt the connected car as a new data source: just six per cent expect to use data from connected
cars in the next three years, 26 per cent within five and 62 per cent within ten. Given the ubiquity of the car
in daily life, and the potential of cars equipped with automated payment capabilities, this could leave banks
blindsided to an important new source of data.

41
The Role of Analytics in the New Banking Age, Earnix, February 2017

32 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 33

 IBM Viewpoint

We often think of Industry 4.0 as relevant only to manufacturing and supply chain industries, but
many of the transformation drivers of this trend also strongly resonate in IBM’s work with global
banks to help transform their cost base and position for a new digital future. We are working on many
bank initiatives to reduce cost and increase efficiency through deployment of Robotic Process Automation
(RPA), increasing the effectiveness of client communication with AI, our work in blockchain is world
renowned, and IOT is beginning to have an increasingly larger impact in retail banking and insurance.
But it is when these 4 forces align into single initiatives that the impact can be fully appreciated. A example
of this is the industry-leading We.Trade initiative led by a consortium of 8 major European banks to
revolutionise SME trade finance.

Many small- and medium-sized businesses (SMEs), for example, struggle to access affordable trade
financing, which constrains their ability to engage in international trade. With 57 per cent of trade
finance requests by SMEs rejected, this trade finance gap acts as a drag on growth and jobs. A solution is
set to emerge early next year: IBM and a group of banks, including Deutsche Bank, HSBC, KBC, Natixis,
Rabobank, Société Générale, Santander and UniCredit, are building a cross-border trade finance
platform – known as We.Trade - using blockchain-based smart contracts based on the Hyperledger
Fabric technology.

The project has involved end customers from the beginning, using their feedback to inform the concept
development and improve solution design. The technology will track goods and automatically release
payments as they move across Europe, with the blockchain technology facilitating complete transparency
and trust to SME’s and Banks, meaning that Banks are now in a more informed position to offer credit
facilities. We.Trade has the potential to revolutionise trade finance, which remains a cumbersome process
that leaves companies waiting weeks before they are paid for their goods. The system will use smart
contracts — a way of encoding a process on to a blockchain system — to track all events from order to
shipment to receipt and automatically transfer money as the goods transit across Europe and trade
conditions are met. By reducing paperwork and bringing trust to SME Trade, the system could encourage
more SME Trade across Europe with the certainty of receipt of goods for buyers and of payment for sellers.
Uncertainty about the identity of unknown counterparties is removed – all clients on we.trade will be KYC-
checked by their We.Trade bank and banks get the benefit of helping clients grow and prosper through
increasing international trade, with the potential to access new revenue streams by offering additional
trade services in the future.

And this is just the start of the journey. New technologies are creating previously unimaginable

Chapter 4:
opportunities for consumers and businesses. Imagine how supply chains could be optimised and shipping
risks reduced when embedded IoT sensors track and monitor goods every step of the way. Imagine
deploying AI and machine learning to the outputs of those sensors, applying advanced algorithms that can
identify previously unseen patterns and make accurate predictions about best next steps. Imagine how
Social Scoring could increase the quality of goods and services. These technologies, working together, will
reshape our world and further underline how Industry 4.0 will have an impact on the Banking Industry.
Digital Experience
We.trade launches next year. We’re ready…are you?

The right technology is essential in keeping up with a rapidly changing financial

services landscape. IBM is a global cloud platform and cognitive solutions Sponsored by:
company, at the forefront of technological innovation. Our capabilities in data,
analytics, cloud, mobile, social and security have helped the UK evolve to
become one of the world’s most digitally advanced nations.
www-935.ibm.com/industries/uk-en/banking
34 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 35
 Digital Experience Their apps are not just highly engaging, intuitive and,
in the case of Monzo, fluent in emoji, but they also
When you take on a Goliath, as David found, sometimes it’s what you haven’t got that counts. New entrants put a premium on the customer’s time. Mobile-first
in banking may not have the market share, the capital nor the infrastructure of the incumbents – but this digital brands Monzo, Atom Bank and Starling Bank
makes them agile, unencumbered by legacy systems and free to cherry pick their customer base. Like David, can onboard customers in a matter of minutes while
they can pick their weapon of choice and use it to deadly effect to slay a much bigger opponent. And when it Safety Net Credit can carry out not only onboarding
comes to banking, that weapon is the digital experience. and but also credit assessment so quickly as to have
the monies in the customer’s account within 15
It is here that new entrants have the advantage. Without cumbersome legacy systems, they can design minutes.
a digital experience that truly puts the customers first – without having to work around product silos,
This acceleration in onboarding has left incumbents 32% can onboard a new customer for a
unwieldy back-office processing or a “that’s not how we do things” mindset. They have a blank sheet of new account in less than 10 minutes…
paper, the freedom to innovate, experiment and obsess over what really matters to the customer – and the scrambling to catch up. Although one in three of
our respondents say their organisation can onboard but 25% take over 24 hours
end result is refreshingly different.
a new customer for a new account in less than ten
Take Atom Bank, for example – the first challenger bank to be granted a UK licence and also the first bank minutes, 19 per cent take over 24 hours.
in the UK to offer customers the possibility of completing the entire application and approval process for
Perhaps more alarmingly, over a third of our
taking out mortgages from their smartphones. Atom allows customers to log into their accounts using
respondents (39 per cent) cannot onboard entirely
face and voice biometrics, which is usually reserved for the development of video games. It’s a trailblazing
on digital channels, causing friction and frustration
approach to customer experience management from a company that is not afraid to ‘think outside the box.’
for new customers – although 85 per cent of those
In February 2017, Atom displaced First Direct as the UK’s most recommended bank42.
that can’t intend to be able to do so within the next
12 months. This is essential investment: one study

Onboarding: make it easy, make it fast of banking customers found 55 per cent would be
more likely to apply for a financial product if the
39% cannot onboard a new customer
entirely on digital channels
process was 100 per cent online44. And of course,
The genius of digital-only
Tic:Toc – a mortgage in minutes onboarding doesn’t finish when the customer has
banks is their ability to spot
got confirmation. Banks must follow through and
the pain points in the customer
Buying a house is one of the biggest financial decisions most make sure all Know Your Customer (KYC) and Anti Money Laundering (AML) checks have been completed
experience and not only
people ever make – and one of the most stressful. When it and the account is fully activated: that’s what successful onboarding looks like to the customer.
eliminate them but to turn
them into truly joyful moments. comes to leveraging the power of digital to transform an
Onboarding is one such pain
point: one study found that 40
often painful and lengthy process, Australian FinTech Tic:Toc
has it covered. Tic:Toc, backed by Bendigo and Adelaide KYC and AML pain points – the potential of facial
per cent of consumers abandon
retail bank on-boarding process
Bank, is a complete online mortgage solution that uses a
digital decisioning system to assess and approve online
recognition and biometrics
when applying for a new product applications in real-time, offering eligible customers full Banks will point to the KYC and AML requirements as major obstacles to frictionless onboarding,
or service, citing the length of home loan approval in just 22 minutes compared to 22 days, especially in those countries that require customers to present identity papers in person or via post. The
time involved or the amount of including mortgage document production and delivery inconvenience of this creates opportunities for customers to pull the plug on potential purchases: one
personal information required43. upon approval. survey of UK consumers found over half would buy additional services if paper-based identity was not
needed45. Yet, even to this problem, technology now offers a solution.
Already battling entrenched And because the 100 per cent digital solution saves costs,
customer inertia, digital- it can offer customers competitive interest rates and no Challengers have been able to deliver the security and comply with KYC and AML requirements by making
only challengers are highly application, settlement or valuation fees. It seems it’s a full use of smartphone capabilities, particularly facial recognition via the camera, to match customers
incentivised to make sure would- solution customers have been waiting for: in its first month, to their presented identity papers. Monzo, for example, uses a photograph of the customer’s passport or
be customers have no reasons over 25,613 people visited the Tic:Toc website and 11,730 driving licence and matches it to a video selfie.
to drop-off mid-application. began applications on the platform.

42
BDRC Continental’s survey of 15,000 consumers The Battle to On-Board, Signicat, 2016
44

43
The Battle to On-Board, Signicat, 2016 Signicat, 2016
45

36 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 37

 Identity goes digital
A further innovation is a move towards freeing proof This omni-channel deficit was a cause for concern
of identity from the ties of offline sources like driving last year, respondents recognising they would
licences and passports – the real game-changer for need to invest in channel integration to remain
verification would be establishing standardised, competitive over a five-year time frame, and it is still
online identities. An example of this in fledgling form a cause for concern this year. In 2016, two-thirds of
can be seen in the Gov.UK Verify initiative, which our respondents expected to spend at least a fifth
has already formed a partnership with a number of of their 2017 IT budget on achieving omnichannel
banks, services and startups. Other startups such integration but this spend has not delivered a
as OneName and ShoCard are creating centralised surge in omnichannel readiness: the proportion of
services that allow companies to outsource respondents that claim to be fully integrated stands
verification activity using blockchain technology. 75% expect the majority of the adult at just ten per cent. This compares with five per cent
population in their country to have a of banks having made that claim in survey research
A number of countries have national electronic digital identity upon which banks can rely conducted by Marketforce in 2016.
identification initiatives well underway. In Sweden, for the purposes of KYC within five years
However, our respondents remain hopeful that Only 10% claim to have achieved full
for example, BankID, developed by a group of
full omnichannel integration is within touching omni-channel integration…
leading banks, is an electronic identity document,
comparable to passports, drivers’ licences and other physical identity documents, that allows companies, distance: we find 17 per cent are optimistic that their
organisation will achieve it in the next year. Only … 17% think their organisation will get
banks, organisations and government agencies to authenticate and conclude agreements with individuals there in the next year
over the Internet. It now has 7.5 million active users, who use it for online and mobile banking, e-commerce, time will tell if this optimism is justified.
tax declaration and signing legally-binding contracts.

Such initiatives are expected to gain traction: three quarters of our cohort (75 per cent) expect the majority
of the adult population in their country to have a digital identity upon which banks can rely for the purposes
The digital-banking interface – make it personal
of KYC within 5 years. This, combined with open APIs that accelerate credit assessments by enabling
Today’s digital consumers not only demand ease and
customers to give lenders read-only access to their online banking, will enable swifter onboarding across
the industry.
speed; they also crave personalisation. From Amazon’s
shopping recommendations to Netflix’s curated play
Only 20% automatically adapt
lists, customers increasingly expect the world to reflect their online banking interface on the basis
A seamless experience across channels? their tastes and preferences. They expect the brands
they do business with to personalise their offerings
of individual customer habits

and are willing to pay to satisfy their craving for personalised experiences: one in five say they would be
Where paper documents are required, the customer’s onboarding inevitably becomes an omnichannel prepared to pay a 20 per cent premium for personalised products or services and 22 per cent would be
process, with a visit to the branch often required. And, even where onboarding is entirely online, customers happy to share some data in return for a more personalised customer service or product48.
may hop between channels to get the job done and they expect their bank to keep up: one study found 46
per cent of people use multiple screens sequentially when managing their finances online, moving between Again we see new entrants leading the way. Atom Bank customers, for example, can choose their own brand
smartphone, PC and tablet46. Indeed, six out of ten UK consumers believe it’s important to be able to switch logo and colour palette, and can even customise the bank’s name – perhaps making it Janet’s Bank, or
easily between different ways of interacting with a bank47. John’s Bank. This is more than just window-dressing: it’s a way of visually underscoring that every customer
is unique.
Banks need to ensure a frictionless hand-off between channels to ensure a seamless experience but too
often this doesn’t happen: last year we found that customers at 85 per cent of our surveyed banks could not However, the real gains come when the interface demonstrates true understanding of the customer,
learning with every interaction how and when they like to use the app in order to push relevant content and
always start an interaction on one channel and complete it on another without having to restart the process
guidance at the right time to make the experience as intuitive and relevant as possible. Worryingly, only 20
while seven out of ten said that having to re-input data when moving between between channels was a
per cent of our respondents said their organisation’s online banking interface adapts automatically on the
significant cause of customer dissatisfaction.
basis of individual customer habits. This leaves too many banks offering an off-the-shelf experience when
the competition is already bespoke.

46
Google, 2012
47
EY Made to Order: The rise of mass personalisation, Deloitte, 2015
48

38 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 39

 Online advertising – less is more, unless it’s personal Appway Viewpoint
A failure to personalise is nowhere more obvious, their account online is counter-productive unless the
nor more irritating, than when it comes to online adverts are highly personalised.
advertising.
Some of our surveyed banks are clearly only too
First impressions count. And, in the era of open banking, first interactions
Online advertising is the trade-off we all – grudgingly alive to this hazard, choosing not to advertise
- accept for free content on the Internet. Yet there’s on their digital banking interface (22 per cent). matter more than ever before. Customer expectations have been shaped
an increasing backlash against online ads, which Among the remainder that do, 43 percent tailor by the frictionless, intuitive experiences offered by the digital giants like
not only interrupt the digital journey but are seen advertisements to the individual customer but Amazon; convenience with the swipe of a smartphone, individual product
as increasingly sinister, not only stalking customers only a fifth (21 per cent) use a wide variety of both recommendations, compelling pricing, and one-click ordering set the standard for
across the Internet but also implicated in fraud, internal and external data sources to do so. Yet,
modern online experiences. All of this, in your pocket, 24/7.
malware attacks and even attempts to influence the when advanced analytics are applied to big data
US election. sets, they can uncover previously unsuspected
patterns, as well as considerably reducing the risk of Of course, opening an account, taking out a loan, and investing for the future is
Customers are increasingly taking matters into their erroneous conclusions. When Dutch health insurer more complicated than buying a book. Customers have questions that they want
own hands, abandoning sites that take too long Agis, for example, deployed real-time website answered immediately through an app or in the branch. There are also significant
to load because of heavy ad content or deploying personalisation to improve the relevance of content
regulatory and security steps that must be completed.
ad-blocking technology to shut out disruptive for each visitor, it achieved a 24 per cent uplift in
or annoying ads. Tolerance levels are higher for conversion.
personalised ads, however: studies show three- Despite these challenges, digital solutions can deliver an Amazon-like shopping
quarters of consumers would prefer to see fewer but As banks square up to an array of digitally-savvy experience for banking customers by reducing client onboarding from multiple
more personalised ads49. Even so, there’s a balance competitors, they will live or die by the quality of days to a matter of minutes. This can only be achieved with software that takes
to be struck: one in five consumers say they find their digital experience. Seamless, highly personal
customers by the hand and guides them toward the products that best match their
personalised advertising ‘creepy or intrusive’50. and designed around the customer’s habits and
preferences, the bank of the future will value individual needs and expectations. This is achieved by asking questions that are
Given this, banks that use their digital interface the customer’s time as much as their finances: relevant at the right time. Customers avoid question overload, and banks benefit
to cross-sell products need to tread with caution. onboarding in minutes, eliminating potential pain from gathering data incrementally. With each interaction, advanced analytics allow
The right ad, at the right time and place, can be a points or irrelevant adverts from the user experience banks to better understand individuals and anticipate their needs, and then guide
powerful marketing tool: if a customer suddenly and making every moment count. Banks will need
them to the products and services that add immediate value to their lives.
starts spending on baby clothes and nursery to invest in the digital experience or find themselves
furniture then an advert suggesting a child savings at risk of being overtaken in the race to winning the
account or a loan for a bigger car could be a customer. Such experiences need to be personal, secure, and frictionless across all channels.
welcome prompt. Studies show that customers When done right, onboarding happens discreetly in the background, so customers
respond better to offers that are personalised, timely can focus on what they really want: the products and services that fulfill their
and relevant, in some cases generating ten times the
financial needs and make their lives better.
response rate of traditional cross-sell offers made
by the same bank. But pushing a product that’s 85% agree that pushing adverts at
irrelevant only underscores how little they truly customers before they can access their
know their customer. account online is counter-productive
unless the adverts are highly personalised
And timing matters: customers use online banking
for speed and convenience – a quick balance check,
sending a payment to a friend – and anything that Only 21% use a wide
Appway builds software for today, and innovates for the technology of the future. With over ten years of industry
detracts from that, such as having to shut down a variety of online data experience, Appway guides the leading financial institutions, both big and small, as they build sustainable
pop-up ad for home insurance, should be jettisoned. sources to tailor in-app ads and scalable solutions that quickly adapt to changing conditions. Headquartered in Switzerland with offices
Our respondents back this: 85 per cent agree that to the individual customer around the globe, Appway’s award-winning software suite serves over 420,000 users worldwide. More than 225
pushing adverts at customers before they can access institutions rely on Appway to improve internal efficiencies, engage customers across all channels, and keep
ahead of regulations.
49
Adlucent, 2016 www.appway.com
50
Adobe Digital Insights 2016
40 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 41
 Channel Innovation
It is not so very long ago there was only one way to bank: in person, in branch. By the 1990s, people were
signing up for the convenience and speed of telephone banking and there were new ways to access money,
from ATMs to cashback services at supermarkets. Then came digital: 1997 saw Nationwide open the first
online banking service and a decade later, the iPhone launched and banking went mobile. The first mobile
banking apps were launched in 2010 and their adoption exceeded all forecasts: banking apps are today used
by almost four in ten of the UK adult population, who clocked up 159 customer logins every second in 2016,
accounting for 61 per cent of channel interactions to access current account services51.

Chapter 5: Other digital channels include text alerts to help customers manage their finances: 14 such texts were sent
every second in 2016, up 18 per cent on the year before. Web and video chat services are also on the rise:
in 2016 there were 130,000 customer contacts using video chat, up 92 per cent, and 4.4 million customer
contacts were made using web chat – that’s 510 every hour – up 24 per cent from 2015.
Channel
Over the decades, channels have risen and fallen
Innovation in popularity – but none have disappeared. Branch
visits may be down 32 per cent since 2011 and
closures continue, but banks are re-investing in key
locations, investing in video-chat services, self-
serve kiosks and meeting areas with an emphasis
Sponsored by: on the personal touch, while mobile branches drive
out to reach underserved communities in rural
areas. Barclays Bank has gone further: it installs
“Eagle Labs” in under-used areas of branches or
77% think that by 2027 the branch will no
behind main banking halls where members of
longer be integral to competitive advantage
the community can improve their digital skills or
budding entrepreneurs can use 3D printers and laser-
cutters to make their own prototypes. It’s branch banking re-invented. But while branches will remain a part
of the mix for incumbent banks - which must serve all customers, from the digital-natives of Generation Z to
the pre-WWII Silent Generation – their relevance will decline: 77 per cent of our surveyed bankers think that
by 2027 the branch will no longer be integral to their organisation's competitive advantage.

Multi-channel: a winning strategy

While some challenger banks have hitched their fortunes to mobile, with the likes of Monzo and Starling
Bank offering just one channel for the connected customer, most banks are determined to offer customers a
full range of channels.

Customers, it seems, like a choice. They want to check their balance on a mobile app, pay their bills online
and speak to an adviser about a loan – and they want all of this available 24/7 and all at the same time. One
study found 63 per cent of UK consumers believe it’s important to be able to switch easily between different
ways of interacting with a bank52 – and that means no clumsy hand offs between webchat and contact
centre, no need to repeat the same information or be stuck in a queue in a branch.

An app-etite for banking, BBA report, 2017

51

EY
52

42 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 43

 And while digital can help customers self-serve, offering the convenience and speed they crave, it seems the Our respondents agree with the tech giants:
human touch is still essential: one global study found that while 88 per cent of consumers would go online seven out of ten expect smart speakers to become
first to research a new product or service, nearly 60 per cent would then want to visit a branch or call a real mainstream for the delivery of banking services
person to complete the purchase or get advice, with 55 per cent saying it’s important to speak to a person within five years, and they are putting money
at their bank and 44 per cent saying they would not trust a bank without branches53. Other research shows on it, with almost four out of ten (38 per cent)
that, when customers rank banks for a great experience, it is both the quality of the channel experience and expecting to be in a position to offer this channel
the mix of channels that matters54.
within three years.

Customers like to take advantage of increased The convenience of this channel is expected to
channel choice to be in frequent contact with their
79% expect that within five years more prove compelling: almost four out of five (79
bank. Data shows that customer interactions with
banking transactions will be initiated per cent) of our respondents expect that within
their bank are on the rise, up from 2.3 times per
via voice-controlled, intelligent personal just five years more banking transactions will be
month in 2011 to 3.5 times in 2016 and forecast to
hit 6.3 times a month by 202155. More channel choice assistants than by typing instructions into a initiated via voice-controlled, intelligent personal
seems to lead to more interactions – and this is good mobile app or online banking website assistants than by typing instructions into a
news for banks seeking opportunities to impress mobile app or online banking website.
and engage customers. Our cohort of banks remain

71% believe offering multiple channels rather

committed to a multi-channel customer experience,
with more than seven out of ten believing this will Armchair banking
than focusing on just one will prove to be a prove to be a more successful strategy than focusing
more successful strategy in five years’ time on just one channel in five years’ time. Smart TVs, which can connect to the Internet to access a range of services such as video streaming, games
and apps, are also gaining ground, driven by consumer appetite for streaming services like Netflix and
Amazon Prime. Studies show 38 per cent of households in the UK now own a smart TV, and that one-in-five

Hey Alexa, pay my gas bill adults had used them to connect to the Internet in 201658.

Five years ago, a number of banks were trialling

Banks may have mastered the art of the app – but new channels are emerging that banks can’t afford to Smart TVs as a banking channel, with the likes
ignore. Perhaps most significant is the smart speaker with built-in smart assistant functionality, such as of Russian Standard Bank and Spain’s BBVA
Amazon’s Echo or Google’s Home, which have proven a hit with consumers. In 2017, 60.5 million U.S. users developing apps for Samsung’s Smart TVs.
will use one of these assistants at least once per month - that’s over a quarter (27.5 per cent) of smartphone Since then, the advice from security experts is
users, or nearly one in five Americans56. It’s the Amazon family of speakers that dominates this space, for customers not to use smart TVs for banking,
accounting for 75 per cent of the US market, with more than 15 million devices sold57. shopping or even internet searches until the security
is more robust. While this has stalled progress, the

38%
device remains on the banking industry’s radar:

85%
expect to be in a position to offer smart when Westpac of New Zealand was developing its
speakers as a channel within three years multi-channel digital banking programme, Westpac agree that pushing
One, it included smart TVs among the channels adverts at customers before they can
across which customers would be able to enjoy a access their account online is counter-
While for now most consumers use their smart speakers to listen to music or set an alarm, the tech giants are consistent and seamless experience. 75% expect smart TVs to hit the banking
productive unless the adverts are highly
betting that this will increase consumer comfort with voice-activated intuitive control of their environment mainstream within the next decade
and act as a gateway to shopping, banking or control of smart home kit. personalised

53
The Relevance Challenge, Report by EY, 2016
54
Research by Bain & Co in 2015 found that among US banks, 70% of the difference in channel experience scores between the average
bank and the top performer was down to the quality of the experience, and the mix of channels accounted for the other 30%.
55
CACI figures for the BBA, 2017
56
Emarketer, April 2017
57
Figures from Consumer Intelligence Research Partners http://fortune.com/2017/09/18/amazon-sells-15m-echos/ Sources: Statista.com; ONS 2016
58

44 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 45

 Open banking: managing the devolved
As security concerns are addressed, banks see these devices, the nexus of the household, as a potentially
key channel for managing financial services: three-quarters of our respondents expect smart TVs to hit the
customer relationship
banking mainstream within the next decade – and 58 per cent foresee this happening within the next 5 years
– while 15 per cent expect their organisation to offer smart TVs as a channel within two years, rising to 27 per The open banking agenda will see banks cede control of the customer relationship. Almost nine
cent within three. out of ten (89 per cent) of respondents to a 2016 survey expected the majority of their Millennial
customers to be using new services that give them integrated access to all their accounts across
multiple banking providers within three years of PSD2’s implementation60.
Drive-by banking
This doesn’t leave banks much time to prepare
There is stronger backing still for connected cars to for a massive shift in how customers interface 84%
60%
become a banking channel. Commentators predict with their finances. Customer experience is vital
that what we know as automobile connectivity today to retain market share – yet in the era of open
will seem like child’s play in a couple of decades. banking that experience could be jeopardised by
Currently, this connectivity consists of little more the actions of a third party. Little wonder 84 per
than basic services related to road safety. But in a cent of our respondents believe management
few years, cars will truly be autonomous with the of third-party relationships via open APIs will
kind of hyper-connectivity we already enjoy in our become a critical aspect of channel strategy in a
smartphones: from consuming and sharing digital post-PSD2 world.
and audiovisual content to making contactless
payments. Certainly purchases that are closely Yet our findings show this critical issue isn’t 84% believe management of third-
related to car travel – from petrol to tolls to parking getting the attention it warrants. Worryingly, just party relationships via open APIs will
86% expect connected cars to be a
– are expected to be automatically triggered as the nine per cent of our respondents have a well- become a critical aspect of channel
mainstream banking channel
car connects to other connected devices. A number developed strategy while three out of five have strategy in a post-PSD2 world…
within 10 years
of pioneering companies are taking advantage of not even started developing a proactive strategy
this new way of doing business. In the UK, Jaguar …but 60% have not even started
to manage customer experience once their bank’s
drivers can get fuel without leaving the car, thanks to Apple Pay and PayPal, while Visa and Honda are to develop a proactive strategy to
services are accessed via third parties using open
experimenting with a connected car that allows for in-car payments for both fuel and parking.
manage customer experience once
APIs. With months to go until PSD2 hits, this issue
their bank’s services are accessed via
should become a matter of urgency – or banks
third parties using open APIs
Eighty-six per cent of our respondents expect connected cars to hit the mainstream as a banking channel will put at risk hard-earned gains in customer
within 10 years and more than half (55 per cent) believe this will happen in five years. And investment experience and trust.
is coming to match these ambitions: almost a quarter (23 per cent) plan to offer banking services via
connected cars within two years, rising to 48 per cent within five years.

I think, therefore I bank

As the fabric of daily life – from wearable devices to TVs and cars – becomes smart, consumers will
increasingly have the world at their fingertips when it comes to connecting with their bank. And not just
at their fingertips: as we have seen, this world will be increasingly touchless, as smart gadgets interpret
voice and gesture to follow our commands, using biometrics for seamless security checks. By 2020, Gartner
predicts that zero-touch user interfaces will be available on 2 billion devices and IoT endpoints59. And why
stop there? More than a quarter, 26 per cent, of our respondents expect that by 2027 we will see banking
transactions triggered by thought alone.

The Role of Analytics in the New Banking Age, a 2017 report by Earnix and Marketforce in association with the London Institute of
60

59
Gartner Inc, December 2016 Banking and Finance
46 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 47
 Sapient Consulting Viewpoint

The ways that customers interact with their banks has undergone a massive shift in a few short
years: branch visits and telephone banking are in terminal decline as customers embrace the
convenience of digital access. Yet even the web channel is considered as legacy now, as mobile apps
increasingly dominate the customer interaction points.

Further change is coming. Intelligent, voice-activated solutions are expected to rapidly become
mainstream as customers look to enjoy friction-free, personalised and intuitive experiences based on a
collective eco-system of smart devices and data-driven insights.

Some pioneering banks are using PSD2 and open banking as a catalyst for huge innovation and internal
transformation to build the bank of the future. These front runners have begun changing the bank to
become customer-centric via a customer-first principle, versus the traditional bank-first principle. This
means breaking down organisational silos to deliver customer journeys based on the needs of the
customer and changing all internal processes and tools to ensure the journey is delivered as quickly as
possible.

Along with internal transformation, some banks have also setup innovation (or disruption) labs based on
modern engineering practices and tools that allow for fast-paced development and rollout of customer
experiences that embed traditional products and services. An example would be the home buying
journey where, rather than selling a mortgage, the bank engages with its customers to ‘buy a home’ which
includes finding a home with a third party, pre-approving a mortgage product as well as home protection
insurance and all the other services of moving and setting up a new home. This is made possible by the
bank partnering with third parties (estate agents, removal companies, utility/telephone companies etc.)
and facilitating this process via automatic APIs (application programming interfaces) so that the customer
journey is seamless and personalised for each customer.

These frontrunners face the same legacy infrastructure challenges as other banks but are set apart by
their ambition: they have the calibre of leadership and vision to find solutions and make them work that
would not be out of place in a leading technology firm. Rather than boards dominated by accountants,
risk managers and lawyers, the bank of the future will draw on the talents of technologists, futurists,
behavioural scientists and ethnographers. The difference between the winners and losers over the next
ten years won’t just be a technology-deficit; it will be a deficit of imagination, a failure to grasp that
banking is not about products and channels anymore, but about being a trusted partner to the customer –
not just at point of sale, but at every step of life’s journey. Chapter 6:
Sapient Consulting combines expertise around emerging
The Future Customer Relationship
and enabling technologies with a deep understanding
of how industries operate to enable meaningful digital
transformation and business process modernization. We work with organizations across financial services,
energy and commodities, the public sector, and healthcare, delivering strategy & consulting, technology
services and industry oriented solutions. As part of the Publicis.Sapient platform alongside DigitasLBi and Sponsored by:
SapientRazorfish, we’re the enterprise business and technology arm of a leading digital transformation network.
With 5,000 professionals spanning over 20 countries, Sapient Consulting is a global force for digital and
technological change.
www.sapientconsulting.com
48 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 49
 The Future Customer Relationship
The customer relationship is up for grabs. Regulators are determined to give customers a better deal by Our respondents expect the impact of these industry boundaries, digital innovators can insert
forcing competition and innovation on an industry that for decades has been able to coast, relying on developments to be felt quickly in banking. Over themselves into multiple customer journeys, making
customer inertia and high barriers to entry to sustain market share. As this comes to an end with PSD2 and half (56 per cent) expect online lifestyle portals them privy to vast amounts of behavioural and
open banking initiatives, regulators will prise open the big retail banks’ grip and give new entrants the tools through which consumers are able to manage every financial data, which they are remarkably adept at
to woo disaffected customers. aspect of their lives to become mainstream for the converting into compelling customer propositions.
delivery of banking services within three years and
Yet even before PSD2 and the Open Banking agenda hit, customers have been quietly reshaping how they 86 per cent expect this to happen within five years. Social media giants in Asia are already showing just
interact with their financial services providers. Limited uptake of the Current Account Switching Service how potent this threat is. Chinese technology giant
shouldn’t be mistaken for loyalty to existing banking providers: not only are more than half already using These lifestyle portals will reinvent banking as we Tencent has developed its WeChat platform, which
products or services from FinTech firms but only 16 per cent of customers say they are likely to purchase know it. Rather than accepting disintermediation boasts 800 million daily users, most in China, to act
another product from their bank61 . and a slide towards obsolescence in a post-PSD2 as a single retail, lifestyle and banking ecosystem.
world, banks should welcome this opportunity to WeChat enables users to send messages, make
Interactions with Fintech are giving customers a taste for new ways of managing their finances: they are get closer to every aspect of their customers’ lives. payments, invest, order taxis, buy bus tickets and
being encouraged to think about transparency, fairness and easier budgeting as integral to the banking Instead of being pulled in at the point of transaction more, from a single integrated platform that handles
experience – be it “safe to spend” alerts, AI-powered analysis of spending habits or real-time account and stepping back the moment the banking part of roughly 1m transactions per minute. It has already
data so customers don’t drift into overdraft or accrue charges. This is a new type of relationship – and it’s a transaction completes, banks should step forward entered Europe, offering its e-commerce platform
revolutionising how consumers think about banking. Untainted by past mis-selling scandals, new entrants with additional services and support that add real for European companies to sell goods in China and
have been careful to position themselves as trusted partners offering simply-priced products and smart value to the customer. WeChatPay, which targets Chinese tourists in the
tools that put customers in control. This is in sharp contrast to traditional banks that not only penalise region. This is digital on steroids – and it’s the future.
customers for their mistakes but profit from them: after all, analysis shows overdraft fees account for When a customer moves house, for example, they
roughly a third of bank revenues per current account62. don’t just need a mortgage: they need legal services,
movers, cleaning services, utility connections,

83%
Customers now know there’s a better way to manage their money and, even before regulation intervened, insurance, change-of-address alerts… and more.
they were using the digital revolution to take back control. This trend will only accelerate once PSD2 and Bundling these services into one user-friendly agree that banks have an
open banking initiatives bite. experience may sound like a radical step: many
opportunity to help customers manage
will fear a dilution of core banking services that
their lives, not just their finances, better
Reinventing the bank: time to step up risks the bank’s reputation. Yet we no longer live
in a world where banking services require decades
of know-how and customer data: technology has
Customer empowerment will take another leap reduced what were once core-banking functions to
forward as services emerge that allow them to mere utility services the front-end of which can be It’s time for banks to realise that the future is not
manage their growing portfolio of financial service delivered by any start-up with an open API and a about banking; it’s about the customer relationship,
providers in a single portal. This will give customers cognitive-computing platform. and that means being there for the customer every
increased control, better visibility of costs and step of the way. The good news is our research
benefits, and facilitate easy switching to get the Besides, it’s clear that such industry-centric concerns shows the industry is alive to this fundamental
best deal. And why stop at banking? Imagine the don’t trouble the digital trailblazers. Amazon, for shift in priorities: 83 per cent of our respondents
convenience of being able to access all your personal example, didn’t stop at flogging books but went on agree that banks now have an opportunity to
affairs, from utility bills to health records, from retail 56% expect lifestyle portals to be mainstream to confound rivals with highly successful moves into help customers manage their lives, not just their
loyalty cards to travel cards, in a single portal? as a channel for banking services within 3 years cloud services, logistics, media and entertainment, finances, better.
consumer electronics and even bricks-and-mortar
retailing and lending. Alibaba is not just a vast
e-commerce company but also offerings asset
management, lending and payments, along with
B2B and ride-hailing services. By blurring traditional
61
World Retail Banking Report 2016, Capgemini/Efma
62
How to flourish in an uncertain future, Deloitte, 2017
50 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 51
 Your bank, your money, your life
What might a lifestyle portal look like? In addition to an intuitive user-friendly experience, the lifestyle portal
Driving convenience and contentment:
will be highly personalised with a focus on adding value to daily life with five key themes:
The use of banking and non-banking data, including real-time location data, creates opportunities to
One-stop money management: deliver meaningful insights into customer behaviour and anticipate their needs, be it finding an electric
car charging point, recommending restaurants based on your budget and personal tastes or highlighting
The aggregation of data from multiple accounts, credit cards and loans will allow banks to create a job openings that match your skills and salary expectations.
dashboard so customers have improved visibility of their finances. By partnering with providers of next-
generation personal financial management (PFM) tools, banks can help customers take control and make Banks that become trend-setters in the development of value-added services, rather than following the
better decisions about their financial wellbeing. These tools have already been developed by FinTech, herd, will enjoy first-mover advantage, securing access to ever more data and tying up the best-in-class
and forward-thinking banks are already acting as distributors: in Sweden, for example, Nordea, Klarna,
partner companies, enabling them to move further ahead of the pack. By the time the laggards wake up
Nordnet and SEB have partnered with popular PFM provider Tink to integrate Tink’s technology into their
to the possibilities of the lifestyle portal, these frontrunners will already be embedded in the fabric of their
mobile banking apps, connecting all of a customer’s bank accounts and credit cards in one place and
customers’ daily lives.
offering money management tools.

Personalised insights that make a difference: Customer demand

With access to vast reams of customer data, banks will be well placed to deliver proprietary, personalised
insights and advice to help customers optimise their finances – whether it’s reducing the cost of credit Such wide-ranging lifestyle services may not yet exist – but already it seems there’s latent demand for them
or getting better returns on their savings – and meet their personal goals in life, from buying a house as customers wake up to the potential of mobile apps. Studies suggest 58 per cent of retail customers would
to saving for retirement. Following in the steps of such services already offered by Simple Bank, Monzo move to a mobile-only bank to receive more rewards from their current account, 40 per cent to receive a
and Starling bank, HSBC began testing a platform in October 2017 that lets its customers see all of their more personalised service through the app and a third for better budgeting and predictive tools, while 29
accounts, including loans, mortgages and savings, no matter who the provider, on one screen. The bank per cent would move to access financial services products from third parties through the app that may be
plans soon to beta test a number of features: showing customers how much disposable money they have better value than those offered by the bank itself64.
before their next payday; categorising and providing insights into spending; offering tips on better money
management; and rounding up spending amounts to send the extra to a savings account. Our respondents believe these services are most likely to appeal to Millennial customers, which creates an
opportunity for banks to engage with this most influential of generations.
Getting the best deal, every day:
Access to a customer’s personal data, including spending habits, personal preferences and energy usage, Customers are likely to Millennial Customers born
will enable portal providers to use advanced algorithms and machine learning to constantly check that
customers are getting the best value across their commercial relationships, including their energy tariff,
significantly value… customers before 1982
insurance policy or even retail loyalty scheme. One survey suggests such services could be mainstream
within five years63. Monzo can already direct customers to the best ISA and put your money there for you. Alerts when expenditure is excessive
Soon it plans to use smart software to help customers identify the best gas and electricity supplier and in relation to forecast future costs 84% 66%
auto-switch them to the best deal, and in the future could auto-submit expenses to your employer or
allow customers to pick personalised mortgage deals based on the transactional data it holds.
and savings targets

Friction-free experiences: Personalised information to assist in

choosing a new home
71% 42%
By focusing on the customer’s needs, rather than selling them a product, banks have the opportunity to
reinvent many of life’s big moments – buying a house, starting university or finalising a divorce. Rather
than such moments being blighted by stress and inconvenience, there’s an opportunity to pull together
partners from other industries to create smart solutions and friction-free experiences that add real value
to life, when it really counts.

In 2020 Customer Insight: Navigating the New Data Ecosystem – A Report by Market and TCS, May 2016, three-quarters of respondents said they
63

expect intermediary services that automatically select the best products and services based on an individual’s personal data to be mainstream
within 5 years How to flourish in an uncertain future, Deloitte, 2017
64

52 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 53

 The battle to own the lifestyle portal Flowing with the data torrent
Of course, it’s not just banks looking to step outside Data, and the ability to mine it for insight, will be key to delivering a best-in-class lifestyle portal that
their industry. A wide range of organisations are customers can’t live without. The good news is there’s an ever-expanding data universe to fuel these offers
hoping to offer banking services – and significant as customer behaviours and actions are captured by IoT devices and customers recognise the value of this
numbers of customers may be tempted to let them. data and are willing to trade it for rewards and personalised services.
Indeed, research suggests almost half of customers
with a mobile banking app would trust a digital
payments provider to provide a mobile banking
interface, 31 per cent would trust an online retailer
and 29 per cent a global technology firm65 - this
covers all the members of GAFA, the companies seen
as posing the most potent competitive threat to
incumbent banks.

There is some good news, however. While almost

96% agree that the threshold for what constitutes
two-thirds of our respondents think customers 65% anticipate that customers would prefer 48% of banks expect to use IoT data to deliver good customer communication will be that
would prefer personalised information to assist in personalised information to assist in buying a personalised insight in the next 3 years customers consider the communication to
buying a new home to be delivered by one of the new home from a GAFA firm rather than their
tech titans rather than their bank, when it comes to be a service
bank…
pure financial services they back the bank: almost
four out of five believe customers would react better …but 79% believe customers would prefer Almost half of our respondents (48 per cent) expect extensive use of even the most basic form of
to their bank providing alerts related to expenditure banks, rather than GAFA, to provide alerts their organisation to use IoT-derived data to deliver analytics – descriptive analytics, used to understand
than they would to notifications from GAFA. This when expenditure is excessive in relation to personalised insight within the next three years. what customers are doing – and only 17 per cent
could prove a critical advantage in the coming battle forecast future costs or savings targets But banks will need to tread carefully: in a data- were using predictive analytics, a powerful tool that
to own the customer interface. rich world, sometimes less is more and customers helps anticipate customer behaviours and transform
deluged with alerts that don’t add meaning will soon the user experience70.
The bottomline label them as self-interested marketing and switch
off. 96 per cent of our respondents agree that in 10 In this banks are not alone: many organisations
years’ time the threshold for what constitutes good across a wide range of industries report poor returns

87% believe lifestyle management services that stretch beyond the scope of financial
customer communication will be that customers
consider the communication to be a service.
on their investments in customer analytics because
of poor data quality, the failure to align analytics
projects with business outcomes and operational
services would be effective in increasing customers’ propensity to buy banking products
This is a high bar and demonstrates that it will not bottlenecks that hamper efforts to convert insights
And this is a battle that must be won if banks are to generate sustainable returns in the era of open banking. be access to data, but analytics capability, that will into action71.
Research shows that it’s distribution and the customer interface that delivers 65 per cent of a bank’s determine success. Customers don’t want a bank to
profits66. In recent years, banks have battled anaemic growth and slim returns but analysis by McKinsey show off how much they understand them; that’s Unlike other organisations, however, banks face a
suggests banks that create platforms and extend into non-banking markets could elevate their ROE to now a hygiene factor. They want a bank that can take tight deadline to get their systems and operations
about 14 per cent – far above current industry average67. Our respondents add credence to this: 87 per cent their data and show them how to make life better, ready for the open banking revolution. In the
believe providing lifestyle management services that stretch beyond the scope of financial services would and that provides the tools to make that happen, near future, customers that want to manage their
be effective in increasing customers’ propensity to buy products from their bank. starting now. finances will voice activate not a banking app but
rather a single lifestyle portal. As yet, it remains to
And all those value-added services could open up new revenue streams: nearly one in five consumers say This remains a stretch goal for many banks: one be seen whether this gateway, and all the tantalising
they would be willing to pay their banking provider to know them better68, while automated financial advice survey found only 27 per cent of senior banking business possibilities contained therein, is owned by
could also generate fee-income69. executives felt their organisation was making a bank – or will GAFA get there first?
65
Deloitte, 2017
66
Remaking the bank for an ecosystem world, McKinsey, October 2017
67
https://www.mckinsey.com/industries/financial-services/our-insights/remaking-the-bank-for-an-ecosystem-world 70
he Role of Analytics in the New Banking Age, Earnix/Marketforce, 2017
68
Digital Banking Report: the Power of Personalisation 71
In The Future of Customer Analytics, Sopra Steria/Marketforce found just 38% of customer-facing organisations felt customer
69
In The next frontier, the future of automated financial advice in the UK, Deloitte found up to 15 million British adults would pay for analytics had yielded significant bottom-line benefits for their organisation and just one-third reported a significant improvement
automated advice in at least one of six major financial markets in the customer experience
54 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 55
 Smart Communications Viewpoint Methodology
Today’s consumers demand much more from the companies with which they do business.
They want to be valued as an individual and have two-way conversations that consider This report is based on research conducted by Marketforce
their specific needs and preferences. And they want communications from these companies
to feel like an extension of the service—not just a transaction or a marketing message. It is Business Media and the London Institute of Banking & Finance in
highly significant that 92 per cent of respondents in this report agreed that in 10 years’ time, October 2017. We surveyed over 225 senior figures from across the
the threshold for what constitutes good direct marketing will be that customers consider the banking sector.
communication to be a service.

The good news is, with more data available now than ever before, it is possible for companies Size of organisation:
to deliver highly tailored and relevant communications. At the same time, this massive amount
of data has led to tighter regulatory controls and privacy laws that must also be considered.
Banks are at the forefront of this data opportunity, and are also among the industries that feel
Less than 1000 employees: 28%
this challenge most acutely. For example, savvy consumers today expect banks to leverage
their tremendous amount of data to help them better manage their finances via alerts and tips
1001 to 10,000 employees: 23%
– not just through monthly statements. This is good news for banks as well, with 77 per cent of
respondents believing that money-saving tips can increase customer propensity to purchase.
Over 10,000 employees: 49%
To help retail banks achieve these two-way relationships without sacrificing security or
compliance, enterprises are increasingly relying on Customer Communications Management
systems to deliver the most personalised messages possible via the most appropriate
channel. And with no time to waste, many are turning to cloud-based systems, which can be
implemented quickly and easily, and updated frequently as new functionality is available. Organisation geography:
And the results are clear. One of the largest financial services corporations in the world was
able to save $100 million by taking advantage of our solution to reduce complexity while National-only player: 37%
simultaneously reaching customers on new channels and with more personalisation than ever
before.
Multinational player across one
For more information about how Smart Communications is helping companies scale more continent: 24%
meaningful customer conversations visit www.smartcommunications.com.
Multinational player across
multiple continents: 39%
Smart CommunicationsTM helps the world’s largest enterprises simplify their
customer and business communications – while making those communications
do even more. In 2004, we pioneered the new generation of CCM solutions,
and today we’re still leading this industry as the only cloud/hybrid cloud
solution in the Gartner leaders’ quadrant. Smart Communications customers
rely on our team for the undivided attention of the only independent
company 100% focused on enterprise CCM. No one does more to simplify
template management and put so much control in the hands of the user. That’s why more than 300 global
brands – many in the world’s most highly regulated industries – rely on us to scale the conversation. Smart
Communications is headquartered in London and serves its customers from offices located in North America,
Europe, and Asia Pacific. The company offers a range of solutions including SmartCOMMTM, SmartDXTM,
SmartCORRTM for Salesforce and SmartCaaSTM for Partners.
www.smartcommunications.com
56 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 57
 MoneyLIVE is a brand of Marketforce Business Media which, since 1987, has helped
drive innovation across a range of sectors – Financial Services, Energy & Utilities,
Transport & Logistics and Media & Broadcasting – through high-quality strategic events
and B2B communications. Combining over 30 years of communications and research
expertise, today Marketforce cultivates the most-thought-provoking insight, most
useful networking and learning opportunities and most impactful content-driven
communication campaigns in all the industries it serves.

For more information about Marketforce’s events, webinars and reports visit:
www.marketforce.eu.com

58 | MoneyLIVE by Marketforce The Future of Retail Banking Report | 59

 www.marketforce.eu.com
November 2017
60 | MoneyLIVE by Marketforce