The Future of Banking Transformation to a new norm CCG Catalyst Consulting Group

Transcription

1 The Future of Banking Transformation to a new norm

2 CONFIDENTIALITY STATEMENT This document and its contents are confidential and the exclusive property of CCG Catalyst, LLC d.b.a. CCG Catalyst Consulting Group. Any reproduction or dissemination, in any form (written, verbal, electronic or otherwise), without prior written consent of CCG Catalyst is strictly prohibited.

3 In the not so distant future 3

4 4

5 Disruptions like never before

6 Outdated models get replaced Out with the old In with the new

7 Disruptive forces in banking Consolidation Margin Less diverse revenue stream Waning market share in consumer, real estate, commercial + industrial lending markets Legacy systems Competitor rivalry within the bank industry Cost of customer acquisition customer s switching costs Customers demand for more self service they want it now! Crowdsourcing Threat of new entrants like Google, Apple and PayPal, traditional retailers like Wal- Mart, and new firms like Moven and Venmo. Competition outside of traditional banking are new forms of exchange like peer-topeer payments and cryptocurrencies, such as Bitcoin.

8

9 TRANSFORMING

10 THE PAYMENT PROCESSING ECOSYSTEM Acquirers/Processors Issuers Card Networks Gateways ISOs/MSPs

11 CONSUMER TECHNOLOGY Mobile Wallets P2P Payments Phone-Only Carrier Billing Remittances

12 Future View

13

14

15

16 16

17 17

18 Summing it up Branch transaction activity declined 45% since Check use declined 68% since Top 50 U.S. banks have reduced branch networks. but branch density hasn t changed significantly. With a 40% decline in US bank branches since 1991 and projected continuing decline of 25% by Source FDIC

19 Internet of Everything Move to connected the thing learns the needs, negotiates and recalibrates at will. Move to free markets Move to integrated Move to optimize Move to programmable Move to two-way Started out web enablement of household equipment Banking apps moving towards a similar path Source: Nest

20 We are at the beginning of a major transformation to the financial services industry. 20

21 Transitional factors Internal Strategic Development Planning Segmentation Capital Consolidation [M&A] CHANGE External Changing demographics Creation of aggressive 3 rd competition Technology innovation Economic shift 21

22 Moving towards transformation

23 Changing perspectives CONSUMERS WANT Life experience Integration and automation Self-Serve To make better, more informed decisions Transactions to be in real time Scheduling and tasks BUSINESSES Want help to increase revenue See global markets Self-Serve See technology as a way to get closer to more customers and faster service Transactions to be in real time What do they need?

24 Convenience 24

25 Insights 25

26 Estimated Device Shipments Enterprise Government Home By Sector 2014E 2015E 2016E 2017E 2018E 2019E 3,000 2,500 2,000 1,500 1, Millions Of Devices Shipped Source: BI Intelligence, 2014

27 27

28 Banking moving from transactional to experience Deeper Connection Transaction Level: accurate, convenient, flexible, rewarding Historical Integrated Level: Enhances experience by linking together payment and related products and experiences. Coming now and growing Life experience Level: Everything ties together and provides guidance to individual that incorporates everything. A few years out, but coming quickly. 28

29 9 Ways this will impact banking 1. Strategic planning 2. Banks will move to become engaged with what happens before and after a transaction 3. Cooperative Partnerships 4. More modular add-on technology. 5. More bank programming. 6. More customer centric bank organization. 7. More customer centric internal committees. 8. Bank brands will change 9. More of a relationship sales approach 29

30 What s a Bank to do? 30

31 Follow the leader? 31

32 Listen to your vendors? 32

33 Are you uncertain of how to proceed? 33

34 Who are you? 34

35 What is your business? 35

36 Is it current? 36

37 Are you a leader? 37

38 Differentiation, what is it? Image source: Wikimedia Commons, the free media repository Image source: Digital Trends 38

39 Differentiation, what is it? Image source: Wikimedia Commons, the free media repository Image source: Digital Trends 39

40 What is a Customer Centric business model? 40

41 Banks with strategies that are working 3.00 ROA Before and After Three Strategies that worked

42 Bank with strategy that worked Strategy: Specialize in high net worth individuals. Structure: Three separate but integrated Trust, Wealth Mgmt, and a Private Bank. Specialty in Family wealth and education Financial: Fewer but higher paid staff and lower occupancy. Low losses, low margin, only slightly above average non interest income, and high liquidity. Online presence: Website more of a content site. Weekly economic and market forecasts. Weekly family wealth education seminars. No Facebook. Other comments: Philanthropy as a competence to train others with wealth. Bank 1 Size: $509 Million 42

43 Bank with strategy that worked Strategy: Industrial bank, captive home improvement loans under a retail energy company Structure: Only do home improvement loans, funneled through contractors, funded by primarily brokered CD s. Financial: Very high interest income and high credit losses, netting way above average margin 8.19% with 1% of Assets credit loss and no fee income. Risky lack of liquidity. Efficiency in delivery. Online presence: Facebook reads like newsletter to home improvement contractors. Advertising to a large extent happens through indirect. Other Comments: A number of negative comments on Facebook from consumers. Risk in indirect lending. Bank 2 Size: $1.07 Billion 43

44 Bank with strategy that worked Strategy: Dominate a small area with traditional banking. Mortgage Center, Heritage Club Structure: Three branches, one in larger city. Market share leader in two smaller ones, growing in large. Financial: Mostly from margin with above average loan rates and below average deposit rates. Below avg salary, above avg number of people. Online presence: No Facebook. No content. No press releases. No mobile banking. Online banking requires in person or US Mail. Other Comments: The old school, heads down, own the local market still lives. Bank 3 Size: $284 Million 44

45 Bank with strategy that worked Strategy: Commercial Lender, Specialty in Construction expanded C&I and CRE Structure: Five branches, large metropolitan market area. Market leader in their markets, adding a branch, overall growing Financial: Great margin due to the specialization above average loan rates and higher average deposit rates due to growth requirement. Online presence: Focused to their market and niche. Referrals from other banks Other Comments: Progressive bank, long history (over 150 years) well capitalized, cherry picked loan portfolio. Bank 4 Size: $1.7 Billion 45

46 Transformation is happening, let s plan for it. Banks are transforming from financial services firms to a part of a grand effort of the newly enabled customer to find a more optimal relationship with their money that improves their life experience. It s happening already. With changes coming at a breakneck pace. There s no one answer but many things can be done to prepare. First step? Match the new economy and become more customer centric. 46

47 CCG Catalyst is a banking consulting firm and the trusted strategic advisor to banking organizations throughout the Americas. We understand the needs of our clients. We solve problems that are brought about by the disruptions and changes in the financial industry, technology, and the economy. We strategically think about our clients business, partner with them, to make them successful; but more so we form a relationship, go beyond the trends, imagine the future, and stimulate thoughts. CCG Catalyst is headquartered in Phoenix, AZ, with consulting office across the US.

48 Thank you! CCG Catalyst Consulting Group Two Renaissance, 40 North Central Avenue, Suite 1400, Phoenix, AZ Phoenix Atlanta Austin Chicago New York San Francisco Seattle Washington