Future of European Consumer Finance A joint Eurofinas Roland Berger Survey

Transcription

1 Future of European Consumer Finance A joint Eurofinas Roland Berger Survey Highlights of 1st Edition Warsaw 19 November 2015

2 Objectives of today's meeting Present the results of Roland Berger Eurofinas Survey on the future of CF in Europe Discuss implications for transformation journey of leading players in Europe and Poland 2

3 Top executives of firms member of local federations associated with Eurofinas were polled via an online multiple choice questionnaire Overview of targeted participants & applied methodology TARGETED PARTICIPANTS METHODOLOGY > Country CEOs/ Deputy CEOs CxOs of Consumer Finance Specialists/ Captives/ divisions / credit brokers & intermediaries > Local Heads of Consumer Finance Division/ Business Unit of retail banks/ financial services institutions, auto captives, retailers captives, credit brokers & intermediaries > Out of scope: specialized institutions whose main business focus is mortgage lending or leasing to business/ corporate customers > Survey in the form of multiple choice questionnaire and some open ended questions > Questions focused on opinions not on precise benchmarks therefore requiring no data gathering by participants > Online web survey (with possibility to fill in pdf-paper version if preferred by participant) > Time to complete: ~30-45 minutes > Survey opened from April to July 2015 > Country samples not intended to be statistically representative of any specific national market Source: European Consumer Finance Survey; Roland Berger 3

4 Over 30% of European Consumer Finance represented in the survey covering all business models across 21 countries Participants by geography and business model Business Model 13% 14% 25% 23% 8% Niche players (brokers, mono-product, mono segment) Captives 31% Retail banks 48% 38% Specialists Polish sample composed only of KPF members Europe Poland Source: European Consumer Finance Survey; Roland Berger Strategy Consultants 4

5 Participants represent all size of players; Polish participants have on average higher Cost Income ratios and higher risk Business model and size of participating companies [2014] New business volume [EUR] Cost income ratio Cost of risk ratio 7% 0% 17% > 5 bn 1-5 bn 15% 27% 33% 250 m bn 44% 60% > 45% 7% 39% 45% > 5% 35% 31% 50% 50 m m 19% 11% 26% 10% 10% 20% 40%- 45% 35% % 30% % 39% 18% 0% 36% 4%-5% 2%- 3.99% 1%- 1.99% Europe Poland Europe Poland Europe Poland Source: European Consumer Finance Survey; Roland Berger 5

6 Consumer Finance executives shared their perspectives on 4 topics Survey's key dimensions and selected highlights 1 Growth & margins ca 60% >50% expect declining margins expect single digit new business volume growth 2 Structure & competition 70% >80% ca 20% expect consolidation worried by comparators, ebanks, egiants expected share of pers loans for comparators 3 Trends & threats >90% >70% believe Digital will transform the Industry expect negative impact from insurance and rates regulation 4 Transformation journey > Distribution and operations > KSsF and change roadmap 50% >50% >80% will dematerialize most contracts (up from 20%) will close most contracts remotely see Big Data, omnichannel and ecrm as key areas to work on 6

7 1 Growth & margins Polish players are significantly more optimistic than peers in other geographies on growth and margins (1/2) Market growth and profitability [modes; 2015 to 2018] Expected growth of the new business volume Expected evolution of the financial margin Key points Global Car and motor loans Personal loans Revolving credit > The market is expected to grow in the next years > The financial margins are expected to remain stable on a global perspective for Europe > In Europe, other purpose loans should have a slight increase in margins in the near future while other categories are expected to decrease Other purpose loans > 5% 0%-5% No change -5%-0% < -5% > 50 bps 0-50 bps No change bps < -50 bps Source: European Consumer Finance Survey; Roland Berger 7

8 2 Market structure & competition Most Polish respondents think that consolidation is likely more so than in the rest of Europe Percentage of respondents per country that indicated that consolidation is Likely or Very likely in All participants [%] Consolidation per region [%] Generator of consolidation [%] Key Points 18% 52% 26% 4% 21% 18% 64% 14% 0% North Europe 61% 18% 3% South Europe 7% 40% 47% 7% West Europe 38% 52% 5% 5% East Europe 46% 46% 8% Poland Specialists Retail banks Niche players Captives > Likelihood of national market consolidation varies strongly among countries > Denmark, Poland and Italy are 3 markets where consolidation is most likely to happen > Consolidation can be driven by both Foreign and Locally owned players (55% vs. 45%) Very likely Likely Unlikely Very unlikely Source: European Consumer Finance Survey; Roland Berger 9

9 2 Market structure & competition Participants expect new digitally-enabled players driving competition in the market, as well as retail banks Level of threat expected from competition [% of respondents] Poland vs EU Online brokers/ comparators "Peer-to-peer" platforms Card specialists Retail and universal banks Digital banks Digital players (e.g. Google, Paypal, ) 31% 69% 54% 46% 77% 77% 46% 54% 46% 23% 23% 54% 46% 54% 84% 75% 41% 31% 32% 16% 25% 59% 69% 68% > Polish players more or less in line with Rest of Europe > Relatively higher preoccupation for role of online brokers and comparators expected to account for 15% of personal loans new business by 2018 > Lack of fear for P2P disintermediation to account for less than 5% of new personal loans volumes by 2018 Not important/ Somewhat important Important/ Very Important Source: European Consumer Finance Survey; Roland Berger 10

10 3 Trends and threats Digitalization and "Big Data" are regarded as the most important technological trends in the near future Assessment of the impact of technological trends [% responses; in 3 years] Digitization 94% 6% "Big Data" 88% 12% Sharing economy 39% 61% 23% 77% 8% 92% 46% 54% Key points > Digitization and Big Data seen as ineluctable > Role of sharing economy and of IoT considered as less critical to Consumer Finance business Internet of Things 56% 44% 62% 38% Not important / Somewhat important Important / Very important Source: European Consumer Finance Survey; Roland Berger Strategy Consultants 11

11 3 Trends and threats Insurance cross selling regulation and rate caps considered serious threats to business profitability more so in Poland than in RoE Assessment of the impact of regulatory changes [% responses; in 3 years] Key points Interest rate restrictions/ rate caps Privacy and credit bureau restrictions Insurance cross selling regulation Price and commission transparency Capital and liquidity requirements ECB and other central banks' regulations 65% 58% 68% 37% 48% 54% 4% 11% 11% 25% 22% 14% 85% 64% 77% 31% 15% 23% 0% 18% 8% 38% 38% 15% > Most of the regulatory changes analyzed were considered to have a negative impact insurance cross selling regulation and interest rate restrictions were considered to be the changes with the most negative impact > Only minority of Polish participant expect a fiscal stimulus benefitting CF Fiscal incentives to consumer spending 11% 64% 31% 31% Negative/ very negative impact No impact Positive/ very positive impact Source: European Consumer Finance Survey; Roland Berger Strategy Consultants 12

12 4 Transformation journey Transformation of CF business will center around three major axes Highlights A Massive digitalization 50% will have most of their contracts fully digitalized by 201/8 (up from 20%) Implications > Operations digitalization will be a hygiene factor rather than a differentiator > Complex workforce rightsizing and network restructuring to be managed B2C: Customer journeys going digital B 50% >80% of players will close majority of contracts face to face in 2018 (down from 66% today) will strive to improve omnichannel experience and Big Data leverage > Besides technical improvements, specialists need to develop reason for being vs. banks and online players who have broader client relationships C B2B2C: anchored at POS but changing only 21% of captives (down from 43%) and 41% of specialists (down from 59%) will continue to sell motor loans "just offline" > Need of new partnership models between CF players and dealers/ OEMs integrating the respective customer journeys 13

13 4 A Massive digitalization Polish players expect a significant push towards digitalization stronger than in other geographies Digitization - % of Fully Digitalized Contracts per Region % % % % > 60% % % % % > 60% Northern Europe Southern Europe Western Europe Eastern Europe Poland 14

14 4 B B2C In B2C different customer journey models will continue to co-exist; in Poland shift towards web more dramatic than in the Rest of EU Evolution in customer journey models B2C specialists and retail banks 2014 Proximity centric Integrated mix Remote focus Total Key challenges Proximity centric Majority of contracts are finalized in a physical outlet either originated remotely or not Integrated mix Majority of contracts finalized remotely but at least 30% finalized in a physical outlet Remote focus Majority of contracts finalized remotely with less than 30% finalized in physical outlet Source: European Consumer Finance Survey; Roland Berger % 22% 40% 17% 2% 20% 20% 20% 2% 5% 19% Total 34% 41% 25% 40% 40% 20% % 80% 22% 20% 13% > Proximity INTEGRATED centric MIX addressing decreasing utilization of sales reps maintaining market share in spite of digitization especially prime and young customers > Integrated INTEGRATED mix MIX rightsizing / making proximity footprint flexible reskilling proximity salesforce to make them multi channel right channeling Remote focus building relationships avoiding disintermediation 15

15 Improvement needed 4 B B2C In B2C transformation efforts concentrated on digital only few players see traditional factors as critical Improvement Importance plot for B2C business capabilities [ ] Diversity of non-credit services Social networks as after sales tool Social networks for sales enhancement Leveraging Big Data for targeted client offers Omni channel customer journey management 100% self care* Excellence in physical network sales Excellence in call center capabilities Real time/ fast cycle Customer Relationship Management* Multi channel direct marketing excellence Pricing segmentation Competitive time from application to approval Importance Discussion > Participants underestimate need to review product strategy need to "reframe" sales force > Big Data is too complex to tackle for most players risk of copycat approaches need to think big but start small 1) Percentage of respondents that indicated that a certain business capability will be (Very) Important in ) Percentage of respondents that indicated that a certain business capability will need (Very) Significant Improvement in Source: European Consumer Finance Survey; Roland Berger 16

16 4 C B2B2C Retail finance changing dramatically: ecommerce growing exponentially and most business being at least hybrid Other Purpose Loans: role of proximity vs. role of remote interaction and ecommerce [% participants] Role of proximity vs. role of remote interaction Share of e-commerce on other purpose loans Hybrid journey/ e- commerce 24% 39% 56% >30% of 1 st contacts online Active in ecommerce > 50% 30-50% 10-30% 5-10% < 5% 40% 6% 4% 5% 13% 12% 73% 37% 69% 11% 13% 23% 0% 14% 14% 14% 43% 29% 30-50% Offline journey 37% % 11% 2018 Up to 30% of 1 st contacts online 100% offline from 1 st contact to contract No e-commerce 60% % 6% 27% % % 14% 0% 14% % 5-10% < 5% No e-commerce 17

17 4 C B2B2C B2B2C players see as a priority to improve on quality of service and pricing Improvement Importance plot for B2B2C business capabilities [ ] Improvement needed Range of complementary products for end customer (e.g. insurance, shopping guides, deals,..) Web/ mobile marketing support to dealers/ partners Omni channel customer journey management Competitive time from application to approval in e-commerce channel Four clear priorities in Poland time to yes at the POS time to yes in ecommerce smart pricing and commissioning marketing support to dealers 20 Pricing and commissioning segmentation by end customer value 10 0 Range of complementary products for dealer (e.g retailer financing) Competitive time from application to approval in the Point of Sale (POS) channel Europe Excluding Poland Poland Importance 1 1) Percentage of respondents indicating a certain business capability will be (Very) Important in ) Percentage of respondents indicating a certain business capability will need (Very) Significant Improvement in Source: European Consumer Finance Survey; Roland Berger 18

18 Anticipating the trends evidenced by the survey, a number of players are trying to reposition themselves along 5 axes Summary of findings > Modest growth and shrinking margins in EU Poland relatively better especially on volumes Repositioning axes Value proposition review > Disintermediation risk for "traditional" specialists from new players and traditional banks > Strong drive towards digitalization of operations > Strong shift towards remote channels in both B2B2C and B2B but proximity remaining important "End customer" journey transformation Partner experience enhancement Data leverage Digitalization of operations 19

19 Thank you Edoardo Demarchi Partner Konrad Gruda Principal

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