Here, There, Everywhere: The Rise of Omnichannel Banking. Chris Fleischer Market Research Manager D+H

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1 Here, There, Everywhere: The Rise of Omnichannel Banking Chris Fleischer Market Research Manager

2 Omnichannel is more than a buzzword

3 Omnichannel is more than a buzzword

4 Consumers are doing omnichannel already

5 What Has Become of Our Channels?

6 6 Anyone think it s getting easier?

7 Stop the Craziness! Chris Skinner, Financial Services Club Blog April 2012, Never Mind the Channels Mobile is not a channel. Internet banking is not a channel. Nothing is a channel! We don t think, I m on my mobile channel and I shall switch to my internet channel later. I m doing digital stuff and will soon be doing physical stuff. My digital stuff IS my physical stuff It s time to rationalize our channel strategy and understand that members use multiple channels the rise of omnichannel banking

8 The evolution of channel management

9 Agenda Channel Activity Trends and Growth Branch Banking Online Banking Mobile Banking Rise of Omnichannel Banking Recommendations / Concluding Thoughts What s Next?

10 Channel Activity - Trends Online banking of the late 1990s spurred the end of the branch While online banking grew in the 2000s, it was matched (precipitated) by growths in broadband availability and consumer acceptance of online payments Online banking users are still growing at a 2-4% CAGR, but expected to flatten out by 2015

11 Channel Activity - Trends With the maturation of online banking and the rollout of Mobile 3.0, some are suggesting that the end of the branch is here really, this time Rather, we re more likely in an era of change embracing the end of the branch as we know it Transactions are declining Non-interest income is being attacked Average transaction costs are rising Self-service channels are taking up the decline and more 11

12 Channel Activity Growth Source: CEB TowerGroup

13 Channel Activity Growth Source: CEB TowerGroup 13

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15 Channel Preferences

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17 Branch Banking

18 Branches get a bad name in non- Financial Services news, too!

19 Strong divide in consumer usage of branches

20 Pressure to reduce expenses

21 Branch Banking Important channel, still influential, but under attack as the costly alternative channel Trends declining: # of branches # transactions, and % of new accounts Startups (Simple, Moven, GoBank) claim the branch model is dead Yet, branch is still the channel of choice for opening up a new account

22 Branch Banking

23 Branch Banking

24 Branch Banking

25 Branch Banking

26 Branch Banking What is growing in the branches? New technologies Back Counter Check Capture / Teller Capture Cash handling / dispensers Staff Management / Workforce Automation Video conferencing for member contact with remote SMEs Scheduling branch visits online or via mobile Sales & Service culture (sales through service) Business Intelligence technologies are coming to the front lines; Combined with CRM tools to better understand the member relationship Account opening processes have become more efficient with stronger cross-sell results Use of tablets in the branch for product introduction and account origination

27 Branch Banking

28 28 PNC s Pop Up Branch

29 Branch Mobility 29

30 Question? How many of you are planning to grow your branch presence over the next 3-5 years? How many of you are planning to shrink your branch presence over the next 3-5 years?

31 FIs are planning for growth 31

32 32 Synergistics, 2013 Branch Banking

33 Branch Growth correlated to CU Growth 33

34 Strengths: Branch Summary Member acquisition, cross sales, retention, personalized member service, presence in the community, reputation Weaknesses: Highest cost channel, not considered a green choice, Gen Y utilizes less than other generations Opportunities: Branch re-design and use of newer technologies Threats: 34 Direct banks, Pre-Paid Debit Card Services

35 Online Banking

36 The prospects remain strong 80 million users (US) Online Banking Today 2-4% annual growth Consumers value convenience However... Consumers don t want to pay for it Demand for more functionality Demand for better experience Comparing to Amazon, Facebook, etc

37 Online Banking Online banking users growing at CAGR of 2.0% Online banking transactions are growing at CAGR of 4.0% The number of transactions online account for as many transactions occurring in branches and at ATMs combined Over 30 billion transactions Source: TowerGroup

38 Online Banking

39 Online Banking

40 Online Banking

41 Online Banking

42 Growth in new lending accounts online

43 Online Banking New Technologies & Features Expanded payments Bill Pay, A2A, P2P, Presentment Remote Deposit Capture Personal Financial Management Targeted Marketing Online Account Opening and Funding Account Alerts Rewards Live Chat User Experience Simpler views / Dashboard / Widgets However, be aware of personalization / customization that might lead to member service issues Table Stakes Security and Fraud Prevention

44 Source: Celent Online Banking

45 Online Banking

46 Strengths: Online Banking Summary Lower cost, member acquisition, green choice, targets Gen Y Weaknesses Less face time with member Opportunities: Improvements in cross selling, retention, reward recognition Threats: 46 Mobile is overtaking online for some functions such as P2P and remote deposit capture

47 Mobile Banking

48 Mobile Does Everything Even an ATM!!!

49 Mobile is Fun! And Intense!

50 Mobile Banking Google Vice President Vic Gundota: Mobile First when we announce new services for desktop computers we will debut an equally powerful mobile version

51 Mobile Banking

52 Mobile Banking

53 Mobile Banking

54 54 Mobile Banking Voice Banking

55 Mobile Banking New Technologies & Features Expanded payments Bill Pay, A2A, P2P Remote Deposit Capture Personal Financial Management Targeted Marketing Account Opening & Funding (or w/out funding.. ex: Citi) Account Alerts Click to Call User Experience Simpler views / Dashboard Pre-staging ATM visits (to access ATM without a card) Augmented reality for branch / ATM location Table Stakes Security and Fraud Prevention

56 Source: Celent Mobile Banking

57 The State of Mobile Remote Deposit Capture US FIs offering mrdc to grow from 2,300 to 6,000 in FIs deployed mrdc in the first six months of 2013 leading to 10 million new users End users to grow to an estimated 60 million in % of respondents reported no RDC losses in % said they had a single loss incident Chase notes that mobile deposit costs about 3 cents per transaction vs. 65 cents per transaction through a teller B of A notes 10% of deposits coming through mobile

58 Mobile Only consumers don t really exist Myth: Gen Y is Mobile-Only (Javelin) Mobile-only consumers don t really exist. Although 41% of Gen Y consumers are active monthly users of mobile banking, very few avoid other banking channels. Not only are mobile-only consumers scarce within Gen Y, but also among all age segments. Today, only 2.4% of Gen Y consumers are mobileonly bankers vs. 1.4% across all other segments of the population. Millennials still turn to a variety of channels to manage their finances. Although adoption rates among mobile/smartdevice users are rising, the reality is that most consumers aren t yet ready to commit to a banking experience that is exclusively phone and tablet based.

59 Strengths: Mobile Banking Summary Lower cost, retention (me, too), green choice, targets Gen Y, alerts Weaknesses: Not ideal for member acquisition and cross sales, lacks human touch member service Opportunities: Mobile usage across other industries will help drive consumers to consider managing their finances via the same device they use for shopping; Mobile Payments! Pricing Fees for P2P / A2A payments, POS payments, remote deposit capture Threats: 59 Lacks 1 to 1 relationship building

60 Concluding Thoughts

61 If you believe branches are dead, then so are you. (Chris Skinner)

62 Rise of Omnichannel Members are using multiple channels Consistency For employees 360 degree view For consumers user experience, 360 degree view For marketing relationship management For security and compliance Products and Pricing How many have relationship or packaged pricing related to channel usage? How many are considering it?

63 Concluding Thoughts All channels are becoming alternative Branches have dipped (in number), but mostly due to large bank consolidation Online banking is reaching a maturity point in usage, but with great opportunity to enhance functionality and user experiences Mobile banking is the New, New Thing in Financial Services, with tremendous potential to be materialized once mobile payment functionality is achieved

64 Concluding Thoughts What s the next channel? Is it here already?

65 Wearables

66 Wearables

67 THANK YOU! Chris Fleischer Market Research Manager