Bricks To Clicks. Agenda

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Austin Moore
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2 Agenda 2

3 Agenda The evolution in branch banking Where are we heading? Taking advantage of these changes 3

4 Four Reasons For Changes In Banking Channels 1. Growing population and geographic shifts in population 2. Federal/State legislative changes that relaxed branching laws 3. Banking crises 4. Technology 4

5 Growing population and geographic shifts in population 79 percent of U.S. branches are located in metropolitan areas 90 percent of net office growth since 1987 occurred in metro areas 11 percent are located in micropolitan areas 7 percent of net office growth since 1987 occurred in micro areas 10 percent are located in rural areas 2 percent of net office growth since 1987 occurred in rural areas 5 Source: FDIC

6 Federal/State legislative changes relaxed branching laws In 1979, these states were unit banking states: o Texas o Colorado o Illinois o Kansas o Minnesota o Missouri o Montana o Nebraska o North Dakota o Oklahoma o West Virginia o Wyoming Between five of these states were among the 10 states with the largest increases in banking offices 6 Source: FDIC

7 Banking Crises Two periods of branch contraction o Followed the Thrift crisis o 180 bank failures a year starting in the late 1980s o Followed the 2008 recession o 100 bank failures a year between 2008 and Source: FDIC

8 Branches Opened And Closed Since 2008 New Offices Opened 11,132 Offices Closed Due To Failure -1,159 4,438 Net Closings Since 2008 Offices Closed Due To Mergers -1,087 All Other Closings -13,324-15,000-10,000-5, ,000 10,000 15,000 8 Source: FDIC

9 Is The Crisis Over? For 2016 one in three FIs plan to open new branches this year The average size will be 1,000 square feet o 4.7 percent of FIs will increase the number of branches by 10 percent o 11.3 percent of FIs will increase the number of branches by 5-10 percent o 17.9 percent of FIs will increase the number of branches by 1-5 percent 9 Source: The Financial Brand

10 Technology Some of the important banking technologies introduced over the past 50 years: ATMs debuted in 1969 Credit Cards became common in the 1970s Telephone Banking appeared in the 1970s Debit Cards introduced in the 1990s Online Banking began in the 1990s Remote Deposit Capture a 21 st century service Mobile Banking smart phones are driving adoption Interactive Teller Machines (ITM) Community ITMs segue to the home 10

11 New York Times Financials Net Income - $33.3 million Production costs $644 million Raw Materials - $ 89 million Wages and Benefits - $ 358 million Other - $ 197 million 11

12 New York Times Financials Net Income - $33.3 million Production costs $644 million Raw Materials - $ 89 million Wages and Benefits - $ 358 million Other - $ 197 million Sunday Print Circulation 1,185,400 Daily Circulation 649,000 12

13 New York Times Financials Net Income - $33.3 million Production costs $644 million Raw Materials - $ 89 million Wages and Benefits - $ 358 million Other - $ 197 million Sunday Print Circulation 1,185,400 Daily Circulation 649,000 - Price of Kindles for all print subscribers ($194 including 8 percent sales tax) - $230 million - Kindle distribution cost ($5 per print subscriber) - $ 6 million Total cost to purchase and distribute Kindle to subscribers - $236 million 13

14 New York Times Financials Net Income - $33.3 million Production costs $644 million Raw Materials - $ 89 million Wages and Benefits - $ 358 million Other - $ 197 million Sunday Print Circulation 1,185,400 Daily Circulation 649,000 - Price of Kindles for all print subscribers ($194 including 8 percent sales tax) - $230 million - Kindle distribution cost ($5 per print subscriber) - $ 6 million Total cost to purchase and distribute Kindle to subscribers - $236 million Savings by ceasing print circulation and moving all subscribers to digital - $408 million 14

15 45% 40% 35% 30% 25% 39% Would Consider A Bank Without Branches 29% 20% 15% 16% 10% 5% 0% Years Old Years Old 55+ Years Old Would Consider A Bank Without Branches 15 Source: Accenture 2014 The Digital Disruption in Banking

16 Customers Who Would Bank Here Square 50% PayPal 41% T-Mobile Costco Apple Google 31% 29% 29% 29% Amazon AT&T Mobility Sprint 26% 26% 26% Walmart Yahoo USPS 21% 20% 23% 0% 10% 20% 30% 40% 50% 60% 16 Source: Accenture 2014 The Digital Disruption in Banking

17 If These Companies Offered Banking Services Would You Bank With Them? Years Old 77% Years Old 58% 55+ Years Old 28% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 17 Source: Accenture 2014 The Digital Disruption in Banking

18 100% U.S. Smartphone Penetration (Percent of Population Age 13+) 75% 55.0% 66.8% 75.8% 50% 43.0% 25% 0% Source Federal Reserve Bank of Boston Mobile Banking and Mobile Payment Practices

19 100% What Have You Done With Mobile Phone Over Past 12 Months? 94% 75% 71% 50% 61% 57% 51% 48% 40% 25% 0% Checked Account Balance Downloaded Mobile App Transferred Money Received An Alert Deposited A Check Made Bill Payment Located Closest ATM 19

20 35% What Makes My FI Convenient? 30% 25% 26% 23% 30% 20% 15% 20% 18% 18% 16% 13% 10% 5% 0% Leading Online/Mobile Service No Foreign ATM Fees Branches Nearby Many Branches and ATMs 10% 9% ATMs Nearby 4% 6% Convenient Branch Hours 1% 4% Telephone Access 2% 1% Other Harland Clarke Corp. All rights reserved.

21 My Relationship With My FI Is 29% 71% Transactional Advice Driven Consumers are buying low-margin products from their financial institutions and shopping around for high-margin products 21 Source: Accenture 2016 Banking Shaped by The Customer 2016 Harland Clarke Corp. All rights reserved.

2014 - My Relationship With My FI Is 2015 - My Relationship

around for high-margin products 22 Source: Accenture 2016

22 My Relationship With My FI Is My Relationship With My FI Is 29% 21% 71% 79% Transactional Advice Driven Transactional Advice Driven Consumers are buying low-margin products from their financial institutions and shopping around for high-margin products 22 Source: Accenture 2016 Banking Shaped by The Customer 2016 Harland Clarke Corp. All rights reserved.

23 70% 60% 50% 58% 54% In-Branch Activity Preferred Routine branch transactions shift to other channels 40% 30% 35% 20% 10% 0% Depositing Funds Source: Novantas

24 In-Branch Activity Preferred 70% 60% Routine branch transactions shift to other channels 50% 58% 54% 40% 30% 35% 20% 26% 25% 22% 10% 0% Depositing Funds Withdrawing Funds Source: Novantas

25 In-Branch Activity Preferred 70% 60% Routine branch transactions shift to other channels 50% 58% 54% 40% 30% 35% 20% 10% 26% 25% 22% 19% 15% 13% 0% Depositing Funds Withdrawing Funds Transferring Funds Source: Novantas

26 In-Branch Activity Preferred 70% 60% Routine branch transactions shift to other channels 50% 58% 54% 40% 30% 35% 37% 35% 36% 20% 10% 26% 25% 22% 19% 15% 13% 0% Depositing Funds Withdrawing Funds Transferring Funds Resolving Issues Source: Novantas

27 100% Consumers Who Used Particular Channel More Than Once In Past 30 Days 82% 75% 68% 68% 50% 36% 25% 28% 0% Online ATM Mobile Call Center Branch 27 Source: Nielsen

28 Consumers Use Of Retail Banking Channels 5% 5% 10% 15% 65% Multi-Channel Branch Only Web Only Contact Center Only ATM Only 28 Source: Clickfox 2014

29 Account Holder Interactions Branch Contact Center 100% 75% 25% 27% 29% 31% 32% 33% 35% 36% 40% 50% 21% 51% 54% 56% 57% 58% 58% 59% 59% 57% 12% 43% 25% 30% 0% Average Number Of Web Transactions Per Week 29 Source: McKinsey and Company

30 Decline in branch activity levels is due in large part to consumers increasing usage of mobile and online banking channels.** If banks don t align their multichannel strategies with this seismic shift in consumer preference, they ll be at a significant competitive disadvantage. Financial institutions have their work cut out for them because transforming the branch network is neither cheap nor easy. ** - Stephen Greer, Analyst, Celent 45.3% decrease in average number of branch transactions ,700 monthly teller transactions ,400 monthly teller transactions 30 * FMSI, What will your Branch Transaction Volume be in 2025 **Bank Innovation US Branches to Decline 30-40% as Consumers Migrate to Digital Channels

31 Decline in branch activity levels is due in large part to consumers increasing usage of mobile and online banking channels.** If banks don t align their multichannel strategies with this seismic shift in consumer preference, they ll be at a significant competitive disadvantage. Financial institutions have their work cut out for them because transforming the branch network is neither cheap nor easy. ** - Stephen Greer, Analyst, Celent 84.2% increase in average teller salaries 1992 $ 8.85 per hour 2012 $16.30 per hour 31 * FMSI, What will your Branch Transaction Volume be in 2025 **Bank Innovation US Branches to Decline 30-40% as Consumers Migrate to Digital Channels

32 Decline in branch activity levels is due in large part to consumers increasing usage of mobile and online banking channels.** If banks don t align their multichannel strategies with this seismic shift in consumer preference, they ll be at a significant competitive disadvantage. Financial institutions have their work cut out for them because transforming the branch network is neither cheap nor easy. ** - Stephen Greer, Analyst, Celent 123.6% increase in branch labor cost per transaction 1992 $.48 per transaction 2012 $1.08 per transaction 32 * FMSI, What will your Branch Transaction Volume be in 2025 **Bank Innovation US Branches to Decline 30-40% as Consumers Migrate to Digital Channels

33 Sales Sources 6% 2% Planned to open an account w/o prompting 12% Thinking of opening account and prompted by receiving something from bank 21% 59% Thinking of opening account and prompted after talking to someone at bank Not thinking of opening account until prompted by someone at bank Not thinking of opening account and prompted after receiving something from bank 33 Source: 2013 Gallup U.S. Retail Banking Survey

34 SO WHAT DO WE DO??? 34

35 Be Omni-Channel Align channel experiences o Gen Y shops online but would rather open accounts in branches o A poor online experience takes you out of the running o Extend your reach Help customers purchase a vehicle Help customers find and purchase a home Etc 35

36 Be Omni-Channel Align channel experiences o Gen Y shops online but would rather open accounts in branches o A poor online experience takes you out of the running o Extend your reach Help customers purchase a vehicle Help customers find and purchase a home Etc Promote Mobile - Mobile consumers access their financial information 66% more often than online non-mobile users, providing additional opportunities to cross-sell 36

37 Be Omni-Channel Align channel experiences o Gen Y shops online but would rather open accounts in branches o A poor online experience takes you out of the running o Extend your reach Help customers purchase a vehicle Help customers find and purchase a home Etc Promote Mobile - Mobile consumers access their financial information 66% more often than online non-mobile users, providing additional opportunities to cross-sell Cross sell o In the branch o Through the mail (postal and digital) o Online 37

38 Be Advice Providers Retain space as trusted advisors Deliver tailored and personalized advice when and where the customer wants it 38 Source: Milward Brown Digital

39 Segment Characteristics Channel Engagement 39

40 Segment Characteristics Channel Engagement Established 18% of HHs - Upscale - Empty Nesters - Well-Educated - Homeowners - Branch and online users - Appreciate convenience of online banking - Don t fully trust mobile banking 40

41 Segment Characteristics Channel Engagement Established 18% of HHs Sophisticate 15% of HHs - Upscale - Empty Nesters - Well-Educated - Homeowners - Upscale - Families - Well-Educated - Homeowners - Branch and online users - Appreciate convenience of online banking - Don t fully trust mobile banking - Mobile and ATM users - Use smartphones for quick activities - Don t view the branch as convenient 41

42 Segment Characteristics Channel Engagement Established 18% of HHs Sophisticate 15% of HHs Traditionalist 25% of HHs - Upscale - Empty Nesters - Well-Educated - Homeowners - Upscale - Families - Well-Educated - Homeowners - Midscale - Retired Seniors - Low-Education - Homeowners - Branch and online users - Appreciate convenience of online banking - Don t fully trust mobile banking - Mobile and ATM users - Use smartphones for quick activities - Don t view the branch as convenient - Branch bankers who value safety of branch - Don t fully trust mobile banking 42

43 Segment Characteristics Channel Engagement Established 18% of HHs Sophisticate 15% of HHs Traditionalist 25% of HHs Connected 33% of HHs - Upscale - Empty Nesters - Well-Educated - Homeowners - Upscale - Families - Well-Educated - Homeowners - Midscale - Retired Seniors - Low-Education - Homeowners - Low to Midscale - Young with kids - Some College - Renters - Branch and online users - Appreciate convenience of online banking - Don t fully trust mobile banking - Mobile and ATM users - Use smartphones for quick activities - Don t view the branch as convenient - Branch bankers who value safety of branch - Don t fully trust mobile banking - Mobile and Call Center bankers - Rely on smartphones - Value speed and convenience - Use Call Center when they need personal interaction 43

44 Segment Characteristics Channel Engagement Established 18% of HHs Sophisticate 15% of HHs Traditionalist 25% of HHs Connected 33% of HHs Practical 9% of HHs 44 - Upscale - Empty Nesters - Well-Educated - Homeowners - Upscale - Families - Well-Educated - Homeowners - Midscale - Retired Seniors - Low-Education - Homeowners - Low to Midscale - Young with kids - Some College - Renters - Midscale - Middle Aged - Some College - Homeowners/Renters Source: Nielsen Mu;lti-Channel Consumer Banking Branch and online users - Appreciate convenience of online banking - Don t fully trust mobile banking - Mobile and ATM users - Use smartphones for quick activities - Don t view the branch as convenient - Branch bankers who value safety of branch - Don t fully trust mobile banking - Mobile and Call Center bankers - Rely on smartphones - Value speed and convenience - Use Call Center when they need personal interaction - Online and Call Center bankers - Value speed and convenience - Use Call Center when they need personal interaction

45 Be Advice Providers Retain space as trusted advisors Deliver tailored and personalized advice when and where the customer wants it Be Value Aggregators Be able to provide exclusively priced offers Proactively help customers save and make money Become a key part of the customers social community 45 Source: Milward Brown Digital

46 Be Advice Providers Retain space as trusted advisors Deliver tailored and personalized advice when and where the customer wants it Be Value Aggregators Be able to provide exclusively priced offers Proactively help customers save and make money Become a key part of the customers social community Be Access Facilitators Provide access to accounts when and where customers want it 46 Source: Milward Brown Digital

47 Be Advice Providers Retain space as trusted advisors Deliver tailored and personalized advice when and where the customer wants it Be Value Aggregators Be able to provide exclusively priced offers Proactively help customers save and make money Become a key part of the customers social community Be Access Facilitators Provide access to accounts when and where customers want it o People's preference for using smartphones declines sharply as length of time for an activity or transaction increases 47 Source: Milward Brown Digital

48 Be Advice Providers Retain space as trusted advisors Deliver tailored and personalized advice when and where the customer wants it Be Value Aggregators Be able to provide exclusively priced offers Proactively help customers save and make money Become a key part of the customers social community Be Access Facilitators Provide access to accounts when and where customers want it o People's preference for using smartphones declines sharply as length of time for an activity or transaction increases o 81% of consumers prefer a smartphone for tasks under 5 minutes 48 Source: Milward Brown Digital

49 Be Advice Providers Retain space as trusted advisors Deliver tailored and personalized advice when and where the customer wants it Be Value Aggregators Be able to provide exclusively priced offers Proactively help customers save and make money Become a key part of the customers social community Be Access Facilitators Provide access to accounts when and where customers want it o People's preference for using smartphones declines sharply as length of time for an activity or transaction increases o 81% of consumers prefer a smartphone for tasks under 5 minutes o 43% prefer a smartphone for activities lasting minutes 49 Source: Milward Brown Digital

50 Be Advice Providers Retain space as trusted advisors Deliver tailored and personalized advice when and where the customer wants it Be Value Aggregators Be able to provide exclusively priced offers Proactively help customers save and make money Become a key part of the customers social community Be Access Facilitators Provide access to accounts when and where customers want it o People's preference for using smartphones declines sharply as length of time for an activity or transaction increases o 81% of consumers prefer a smartphone for tasks under 5 minutes o 43% prefer a smartphone for activities lasting minutes o The opposite pattern is true with laptops, with preference for the tool increasing sharply after the 10-minute mark and surpassing smartphones at about 20 minutes 50 Source: Milward Brown Digital

51 Invest in: 51

52 Invest in: Analytics Anticipate customer needs Deliver the products and services customers demand 52

53 Invest in: Analytics Anticipate customer needs Deliver the products and services customers demand Tailored pricing and product development One size fits all does not work anymore 53

54 Invest in: Analytics Anticipate customer needs Deliver the products and services customers demand Tailored pricing and product development One size fits all does not work anymore Distribution Know how your customers want to access and purchase accounts 54

55 Invest in: Analytics Anticipate customer needs Deliver the products and services customers demand Tailored pricing and product development One size fits all does not work anymore Distribution Agility Know how your customers want to access and purchase accounts Be ready to adapt to technological shifts 55

56 Invest in: Analytics Anticipate customer needs Deliver the products and services customers demand Tailored pricing and product development One size fits all does not work anymore Distribution Agility Know how your customers want to access and purchase accounts Be ready to adapt to technological shifts Innovate Anticipate and respond to customers ever-changing needs 56

57 THANK YOU 57

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RETAIL BANKING. Customer Experience Management

RETAIL BANKING. Customer Experience Management RETAIL BANKING Customer Experience Management Thomas K. Hershberger President/CEO Cross Financial Group Lincoln, NE tom@crossfinancial.com 402-441-3131 August 6, 2018 Customer Experience Management (CXM)