Innovations in Financial Services. Hanoi, 9th October 2015

Transcription

1 Innovations in Financial Services Hanoi, 9th October 2015

2 Two major technological forces in banking 1 Channel Explosion 2 BIG Data BCG_innovations in FS-9Oct15_vENG_final.pptx 1

3 The two forces are reinforcing each other 1 Channel Explosion More meaningful interactions 2 BIG Data Simple transactions move to mobile and low-cost channels Complex tasks can now be automated at an even higher level of richness even more transactions to happen electronically Scale allows us to link customer data across types (transaction, facebook) across sources (credit card, online) across time Learning algorithms enable precision targeting of customers when they want it Need identification Product customization / arbitrage Pricing More data/year BCG_innovations in FS-9Oct15_vENG_final.pptx 2

4 Prerequisites for the Internet of Things now in place Cost of sensors $1.30 avg. cost.60 over the past ten years Cost of processing power 50x over the past ten years Cost of bandwidth 40x over the past ten years IPv6 Enough IP addresses = Ubiquitous cloud infrastructure 20x cost per MB over the past ten years 3.4 x 1038 IP addresses Source: Goldman Sachs; Deloitte; BCG analysis BCG_innovations in FS-9Oct15_vENG_final.pptx 3

5 Moreover, position no longer drives company performance Market leadership less correlated with current profitability......as well as future profitability Probability across industries that market share leader is also profitability leader (sales vs. op. margin) Probability that top 3 market share leaders will also be amongst top 3 most profitable in their industry Next year 3 years 5 years Source: BCG analysis, CompuStat, All companies listed on the US Stock exchange BCG_innovations in FS-9Oct15_vENG_final.pptx 4

6 Explosion of digital products and channels Example: POS loans for SMEs Copyright 2015 by The Boston Consulting Group, Inc. All rights reserved. Application and disbursement via bank's POS system Leading Turkish SME Bank 1 Merchant POS terminal as loan portal $ months terms 2 Merchant POS transaction history Automated analysis Leverages merchant network of 190,000+ Contributed to 24% growth in total loans 3 Paperless approval and payment < 5 mins approval via SMS Funds xfr automatically to account Contributed to SME market share gain From 11.2% to 14.6% 1. Point of service (POS) machines installed in retail stores for debit/credit transactions, additionally embedded with loan application features e.g. Loan via POS for SME customers Source: Garanti website, Project Team analysis BCG_innovations in FS-9Oct15_vENG_final.pptx 5

7 Business model innovation (BMI) is more durable What is a business model? What is BMI? Target segment Value proposition Product / service Revenue model Changing two or more components Redefining company s basis for competition Business model NOT Single function's strategy Value chain Cost model Organization Mere product, service or technological innovation Operating model BCG_innovations in FS-9Oct15_vENG_final.pptx 6

8 Pace There have been different innovation approaches Leader New BU in parallel with current biz Actively cannibalize traditional business Follower Reorient business digitally Limited Scope Broad-Based BCG_innovations in FS-9Oct15_vENG_final.pptx 7

9 Pace Easy quick deployment of asset-led low cost bank Leader New BU in parallel with current biz Actively cannibalize traditional business Follower Reorient business digitally Limited Scope Broad Based BCG_innovations in FS-9Oct15_vENG_final.pptx 8

10 The starting point Our client a distant fourth..... with aggressive domestic ambitions Our client BCG_innovations in FS-9Oct15_vENG_final.pptx 9

11 The challenge Incremental strategies insufficient Much smaller distribution than Top 3 Large investment needed catch up RM Bn 120 No. of branches 500 US$ ('000) Furniture 80 Personal Loan Credit Card 0.6 (ABF) Auto Finance Our client ATM Security IT 40 Commercial Loan Client 2007 #3 player 2007 Client 2012 #3 Player 2012 Mortgage Bank Bank Bank #3 #2 # Typical branch setup Renovation A game changing strategy required BCG_innovations in FS-9Oct15_vENG_final.pptx 10

12 Competitive white space identified Mass customers underserved... because seen as unattractive Foreign banks Affluent & mass affluent % of total HH 5% % of deposit 70% The average deposit balance is less than $100 They apply for loans we can never approve... Local banks Middle income 16% 13% Mass (HH income RM1-5.0K) 70% 16% Micro 9% 1% We're losing money on these guys If I could migrate them to ATMs, I would! BCG_innovations in FS-9Oct15_vENG_final.pptx 11

13 Lessons extracted from successful mass models Some spectacular "low cost" failures......as well as spectacular successes Banks dabbled with "low cost" Changed skin only Everything low cost Incremental tweaks BCG_innovations in FS-9Oct15_vENG_final.pptx 12

14 The new business model delivered a transformational sales and service proposition Copyright 2015 by The Boston Consulting Group, Inc. All rights reserved. Parent bank model New Easy model Open 5 days/week, 8 hrs/day Open 7 days/week, 12 hrs/day Lots of paperwork Sales teams specialized along products Paperless Sales people sell all products Tellers & back office Long queues No queues No tellers & back office 30 min to open deposit a/c 3-5 days for loans 5 min to open deposit a/c 10 min for loans BCG_innovations in FS-9Oct15_vENG_final.pptx 13

15 The real deal Warm and cheerful Simple products Paperless, straight through BCG_innovations in FS-9Oct15_vENG_final.pptx 14

16 Game changing results Easy vs. parent Market momentum Operational costs 1/4 X Loan growth 2X 1 market average Roll out time 1/6 X 10,000 new customers/month Ramp up time 1/4 X Market Cap up from 7B to 16B Setup costs Sales effectiveness 1/7 X 8 X Fastest Growing bank in Malaysia beating even Public Bank 1. 1Q10 Assets grew at 17.6% vs market average of 9.8% 2. OSK Investment bank re-rated Client based on outstanding results and potential due to launch of new business model Source: Analyst reports; BCG analysis BCG_innovations in FS-9Oct15_vENG_final.pptx 15

17 Extraordinary share performance on forward prospects of client Share performance since launch of EASY, relative to peer group Accolades from the community of industry analysts and observers Indexed wealth creation RHB: 62% CIMB: 43% 1 Maybank: 33% 1 Public: 33% 1 One of the key highlights...low-cost model it has adopted to expand its reach Launch of EASY pilots Reaping the fruits of innovation: The institution of EASY outlets will enhance RHB Capital's competitive edge 0 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Management intends to transfer the business model back to its branches to improve the operations there 1. Compounded annual growth rate Source: Bloomberg; CIMB; BCG analysis BCG_innovations in FS-9Oct15_vENG_final.pptx 16

18 Pace mbank digital cannibalization Leader New BU in parallel with current biz Actively cannibalize traditional business Follower Reorient business digitally Limited Scope Broad Based BCG_innovations in FS-9Oct15_vENG_final.pptx 17

19 mbank puts clients at the center of interactions Customer centricity = customer orchestrates form factors Banking standard BCG_innovations in FS-9Oct15_vENG_final.pptx 18

20 Eleven major digital financial innovations Gamification State-of-art user interface P2P payments Facebook integration Social Platforms Marketing Real time, event-driven, merchantfunded Modern Direct Banking Personal financial mgt. Full suite All digital delivery Video banking Google-like search 2nd-gen mobile platform Mobile Banking Intuitive user interface Mobile payments Location-based services Selling Deals P2P transfers Personal financial manager BCG_innovations in FS-9Oct15_vENG_final.pptx 19

21 Cash loans modeled on itunes: 7 clicks, 60 seconds 1 Determine amount and duration 2 Confirm T&Cs 3 Credit decision <30 secs, total <60 secs BCG_innovations in FS-9Oct15_vENG_final.pptx 20

22 Copyright 2013 by The Boston Consulting Group, Inc. All rights reserved. Successfully "changing the rules of the game" Retail deposits Current Accounts Retail deposits share (%) C/As share (%) 22 PEKAO 20 PEKAO PKO BRE KREDYT BANK MILLENNIUM ING BZWBK PKO 45% line for proportional share BRE ING MILLENNIUM 45% line for proportional share BZWBK 2 CITI BGZ BPH 2 CITI BGZ BPH Total asset PLN 50 Bn Branch share (%) No of C/As th Branch share (%) BCG_innovations in FS-9Oct15_vENG_final.pptx 21

23 Delivering improved sales and economics Product applications [per 1k logins; Apr 14] Product sales: NmB vs OnB [per 1k logins; Apr 14] 4X 3.6X Investment fund acc Debit card 3.6x 7.4x Sav acc 7.4x Overdraft 3.5x Car loan 2.9x 3.6 Opened OmB 2.9 Converted to products NmB Cash loan 2.8x Car nsurance 2.7x ATM package 2.5x Credit card SME 2.3x Insurance (other) 2.2x NML SME 2.2x 35% C/I 93% interactions digital / direct 81% sales digital / direct BCG_innovations in FS-9Oct15_vENG_final.pptx 22

24 The first steps in your journey Digital Innovation Design Implementation FRAME Define strategic direction & set desired stage of digital innovation 3 DESIGN Design and develop initial prototype to review look, feel and functionality 4 EVALUATE & PLAN Evaluate existing architecture and outline the prioritized features to be released 6 1 KICKOFF WORKSHOP KICKOFF WORKSHOP 2 OPPORTUNITIES IMMERSION SESSION OPPORTUNITIES IMMERSION SESSION OPPORTUNITIES IMMERSION SESSION DISCOVER Understand customers & market context through an ethnographic research and industry benchmark CONCEPTS IMMERSION SESSION CONCEPTS IMMERSION SESSION BLUEPRINT IMMERSION SESSION BUILD Build & conduct iterative testing with consumers 5 CONCEPTS IMMERSION SESSION BLUEPRINT IMMERSION SESSION PITCH IMMERSION SESSION PITCH IMMERSION SESSION BLUEPRINT IMMERSION SESSION PITCH IMMERSION SESSION DEPLOY & LEARN Launch solutions and features and learn improvement opportunities in a systematic way BCG_innovations in FS-9Oct15_vENG_final.pptx 23

25 Thank you bcg.com bcgperspectives.com