Going Digital. Defining the banking transformation roadmap. Highlights from joined A.T. Kearney / EFMA study March 10, 2015

Transcription

1 Defining the banking transformation roadmap Going Digital Highlights from joined A.T. Kearney / EFMA study March 10, 2015 Michel Jaubert, Partner, Paris Daniela Chikova, Partner, Vienna

2 A few considerations before starting the journey Agile Operating Models under construction People engagement challenge Looking ahead towards 2020 A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 2

3 A few considerations before starting the journey Financial services makes the most attractive lunch for digital invaders There is critical mass of smartphone/tablet usage Customers see the world through the screen Clients expect a Digital experience from the platform Digital experience rules the game Digital platforms can dramatically improve the Customer experience Banks need to proactively fuel the customer satisfaction virtuous cycle A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 3

4 1 Financial services make the most attractive lunch for digital invaders Google revenues and keywords price per category (FY 2011) FINANCE & INSURANCE and related terms are clearly to the top invested KEYWORDS No category displays a higher level of competition online Source: Wordstream A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 4

5 # of Digital Banking clients 2 There is critical mass of smartphone/tablet usage Multi-channel strategy Digital Strategy stage 1: ignition Digital Strategy stage 2: accelerate "Post-Dot-Com era" "iphone era" "Emancipated mass customers" Smartphones introduction Tablets introduction Smartphone penetration >50% 1 Smartphone penetration >80% New Inflection Point Technology Workstations Smartphones/ tablets Clients Early adopters Mobile internet users Devices convergence/ IoT (watch, glass) Heavily connected users A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 5

6 3 Customers see the world through the screen A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 6

7 4 Clients expect a Digital experience from the platform (1/2) A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 7

8 4 Clients expect a Digital experience from the platform (2/2) A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 8

9 5 Digital customer experience rules the game The new banking rules coming from the digital paradigm Design & Features simplicity Visual Ergonomics Ease of use Instantaneous Simplicity Transparency Customer proximity re-invented "Social network is key", WE Bank "Beta testing of new digital banking services with customers to capture emotional feedback", LATAM Bank Showroom "We got a table surface, to offer appropriate product & services to customer", LATAM Bank "50% hit rate on cross selling with customized customer profiles", Pure player Traffic & Lead Generation Source: Interviews; A.T. Kearney analysis "Keyword is traffic", WE bank This is about racing to build the audience", WE Pure player "To generate qualified audience to generate sales", WE Bank Innovation driven "On September 14th, Apple announced the IPhone 6 / ios8. The same day our new Apps was ready", LATAM Bank "We are not digital enough", APAC pure player "We decided to develop an application for Google Glass to take competitive advantage", LATAM Bank A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 9

10 Retail Bank Digital platform Retail clients 6 Digital platforms can dramatically improve the Customer experience Branch lovers Multi-channel mass Digital Natives Pro-active / Iterative / Real-time Algorithmic 2 Big Data Customized People 1 Satisfaction 3 Client-centric Relational Emotional Connected Digital Digital Simple Product-centric Transactional Omni-channel Complex A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 10

11 7 Banks need to proactively fuel the customer satisfaction virtuous cycle Frequency (in / outbound) New clients Design positive customer experience Digital customer journey Appeal Mobile traffic generation Data Action / Transaction (Omni-channel) Emotions Customer satisfaction from experience On-line / Off-line / Combined High value-added touchpoints Efficient sales impact Insights Customer data & context Transactions Communication with bank Sentiment versus the bank Behaviour Key events Word of mouth / NPS Loyalty Net promoter score Repeat Desire A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 11

12 A few considerations before starting the journey Agile Operating Models under construction People engagement challenge Looking ahead towards 2020 A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 12

13 Insights presented today are the result of over 20 interviews with senior Multi-channel or Digital executives of leading banks Digitization study panel A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 13

14 Singapore Netherlands UK Austria USA Belgium France Germany Australia Spain South Africa Canada Denmark Italy Sweden Norway Switzerland UAE Poland Czech Republik Malaysia India Russia Brazil China Mobile is becoming THE main digital channel Usage of Mobile Banking in EU already reach 30-40% penetration rate Mobile Banking penetration rate (in %, 2013) na na Mobile becoming THE main channel is confirmed by the panel "This year transaction volumes over mobile is overtaking transaction volumes across all other channels" LATAM Bank "Through mobile we get 11 times more contacts than on computers" WE bank "Our clients are digital, they are always connected" WE bank 85% of the panel put mobile as cornerstone of their Digital Strategy "53% of internet logins are mobile" APAC Bank Sources: Pew Research Center A.T. Kearney Digital Readiness Index 2013 A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 14

15 3 strategies observed Panel position High Digital is a business Long term vision & ambition to be digital by 2020 Digital transformation in the making Cross-functional teams mixing Distribution & Marketing with IT Test & Learn approach in the making Flexible & agile execution in the making Abundant internal communication With digital pure player inside Pure digital model vision Subsidiary to accelerate digital Digital culture & innovation Dedicated lean IT Digital is a project Commitment to digital strategy Clarity of vision Digital banking leadership ambition Project mode Pilots & gradual deployment Long term planning Advanced" - 42% Boosted" - 32% Followers" - 26% Low Source: Interviews; A.T. Kearney analysis Medium Digital transformation roadmap progress Customer experience driven Organizational transformation IT agility Cultural transformation High A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 15

16 Advanced banks run 2 things at once: customer experience consistency across channels and the mobile race Description of the typical example of the digital transformation of a traditional retail Bank Already "half-way through the digital journey" Started early 2010's With an horizon for Follow a "Test & Learn" approach Testing options in parallel with a "solution development" mind-set Full deployment (big bang) of proof of concept Openness to innovation of technology, launch labs, fully connected to start-ups and internet players Placing the client at the center Changing cultural mind-set to "think clients first Enhanced bank-customer proximity in digital-enabled client context Facing the IT transformation challenge Ready to invest hundreds of millions of Euros tickets Target "smart middleware IT" able to "plug & play" cloud services Agile development methodology (Scrum) Conscientiousness of branches evolution Develop flagship stores, showrooms, etc. Prepare staff: communicate, digital training, reallocation/ relocation Source: Interviews; A.T. Kearney analysis A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 16

17 Banks Boosted with a pure e-player inside come in to radically change the game Description of the typical example of the construction of a pure on-line bank Clear Long-term vision Be a pure player Offensive strategy, Market share conquest Systematic obsession for new technology Short Term Roadmap Agile teams, fast time to market Short term plan: 6 months Agility & cost leadership Small teams (not more than hundred FTEs, start-up mind-set) Dedicated / web enabled IT / mostly based on market standard Lean IT: partially outsourced Focus on mobile audience "we are a digital business that happens to do financial services" "Our one and only objective is to create customer experience to generate audience to generate sales" Source: Interviews; A.T. Kearney analysis A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 17

18 Digital implementation success will be driven by client centricity, innovation, flexibility of the organization and culture evolution 7 Key Success Factors Percentages: Key Success Factor quoted by % of the panel A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 18

19 Customer experience obsession 75% of the panel positioned Customer Experience as an essential KSF Be attentive Be ready Be creative and open Be pragmatic Listening through social networks Understand behaviours Concept space/ showroom/ focus groups, beta testing Change mind-set "Everyone in the company thinks client first" WE bank Rich experience is available - digital products & services - digitally enhanced bank-client proximity Notably thanks to a smart IT platform combining services & APIs along with core banking system Connect through labs Co-Create Internally in Digital cross functional teams Externally with focus group & testing resources Innovation lounges with customers Top executives connected with clients "CEO listening to client in call service centres on regular basis" pure player in WE our products pipe is 6- month long to stick to clients changing needs" pure player in WE Security/privacy convenience balance Source: Interviews; A.T. Kearney analysis A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 19

20 Inclusive Digital teams 60% of the panel created cross functional digital teams Mixing IT/ Marketing & Internal/ External vision To produce concrete innovation ready to use services for clients Internal know-how Banking IT Banking products & services Marketing skills Creative Inclusive Digital Team IT skills External knowhow Design (Web agencies/fashion) Digital industry (e.g. from GAFA) Y-generation Digital transformation from other industries (consumer goods, e-commerce) Break silos Integrated design skills: client needs & solution driven New services for clients Build innovative solutions Internal "yes we can" communication Accelerated time-to-market Connected both to Internal & Market reality Source: Interviews; A.T. Kearney analysis A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 20

21 Agile IT platform 60% of the panel is working on agile IT IT transformation is core in digital journey Agility is crucial Innovation and new tech proliferation & acceleration Faster solution to the market Ready to integrate external "cloud" services Technology Smart platform ready to cloud interconnections Plug & play to SaaS, through API Harmonization of the company Data model with ease to access Organization Segregate front integration from back office Seamlessly integrate front-end IT teams with business Culture Empower new technology testing Disseminate customer centricity culture at all levels and deploy solution/ service driven development teams Source: Interviews; A.T. Kearney analysis A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 21

22 Reallocate role of branch 60% of the panel is engaged in the branch role evolution A constrained situation Core & visible body of the bank Branches embody the brand Important number of staff A cultural shift New skills: digital, technology A historical belief: track record in traditional banking, average staff age Countries specific labour regulations Slowing down ability to reallocate staff in some countries Development of "natural attrition" strategy Source: Interviews; A.T. Kearney analysis but a clear movement Clear vision of the change Bigger branches Decrease # of branches Interfaced with digital channels in the customer journey Develop flagships To embody the brand, add humanity in the relationship With exhaustive services and "true expertise" available Allowing customization of services and cross selling even showrooms To extend experience to test innovation and study customers' behaviours A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 22

23 Open innovation & eco-system 45% of the panel is working on an open eco-system Leverage existing solutions New services Internet of Things With digital major players Including core platforms With start-ups 20% the panel mention ''start-ups" 25% the panel mention "partnerships" Source: Interviews; A.T. Kearney analysis A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 23

24 Long-term vision and Short-term execution 35% of panel combine long term vision with short term flexible execution Why How Short-term execution Be agile to find the digital transformation path No traditional bank has reached the digital End-Game; ongoing race An accelerated market environment Fast moving client behaviours & technology introductions Necessity to learn on the move Flexible approach Test & Learn approach Agile cross functional team Frequent plan adjustment (every 6 months or at product launch) Continuous concern for top executives Long-term vision A clear long-term vision to embark internally Embark internally to the cultural change Placing client at the centre Becoming tech-savvy Understand the End- Game and trends Look at pure player model & practices (e.g. such as traffic acquisitions) Capture trends through open eco-system (labs, etc.) Source: Interviews; A.T. Kearney analysis A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 24

25 A few considerations before starting the journey Agile Operating Models under construction People engagement challenge Looking ahead towards 2020 A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 25

26 The main challenge by 2020 is the cultural transformation of the bank to have thousands of staff truly embrace digital How to shift culture Be proactive Develop dedicated KPIs to boost digital Align incentives to break the client ownership competition between channels Train all staff Communicate abundantly Appoint digital ambassadors Be empiric Make demos rather than pitches or speeches Example: "surfing the internet and social media is part of the job in the customer relationship team" Use trial and error approach Ask employees to practice mobile internet Be open Involve everyone including those not directly impacted by digital Explain the test & learn approach Frequently collect & share feedback (every 6 months) Source: Interviews; A.T. Kearney analysis A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 26

27 thus raising the need for a new type of leadership CEO himself is a digital native forging the Digital agenda through his vision Internal and external Striking the balance between BaU and disruption CEO to ensure the reconciliation and the inclusiveness as the natural "Chief Cultural Transformation Leader" Y and previous generations IT and marketing & Business Traditional and digital division / subsidiary Retail banking Executive committees driving Innovation boards Empowered cross-functional teams Adapted governance to support both the digital penetration and the distribution network / IT transformation Source: Interviews; A.T. Kearney analysis A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 27

28 A few considerations before starting the journey Agile Operating Models under construction People engagement challenge Looking ahead towards 2020 A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 28

29 The pace of technology innovation, digital behaviours development & branches transformation will most likely accelerate by 2020 Technology Trends Internet of Things Full penetration of smartphones and tablets Devices convergence Explosion of cloud services Customer Behaviour Evolution Digital usage crossing generations Mobile internet usage increasing Digital culture spreading worldwide in all industries Emerging market directly adopting mobile banking Branches Network Transformation Branches activity decreasing Less traffic than on mobile Fewer but bigger branches integrated in the customer experience embedded with digital (flagship, showroom) Source: Interviews; A.T. Kearney analysis A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 29

30 In that perspective several compelling strategic questions still remain to be answered by Retail Banks Operating model transformation depth & speed Do we truly keep up with the pace of digital change of our (current and future) customers? What needs to change now? by 2017? By 2020? How to accelerate? Digital banking assets & skills How well are we doing at building the right assets & skills to compete in a digital world? How to embed digital innovation in all that we do? Cost transformation and value creation How to engage a more radical cost transformation in order to profitably embrace Digital? IT model How can we adapt our legacy IT architecture to accommodate for Digital? Is it sufficient to digitize our existing omni-channel IT or should a pure-play platform get prepared and possibly become the end-game model? Source: Interviews; A.T. Kearney analysis A.T. Kearney 18/#15207/0EMMEET/FIG/RD/ag/39 30