Future of Retail Banking in Romania

Transcription

1 What do Banking Executives expect to happen Future of Retail Banking in Romania Survey Summary May 2014 Bucharest

2 Agenda Executive summary "Future of Retail Banking in Romania" survey Y8YbtcQklln07kHyQ1 2

3 Executive summary Executive summary (1/2) The Romanian banking industry is currently recovering from dip caused by the global financial crisis, with loans expected to see a positive evolution for both households and businesses However, the industry is still impacted by high levels of non-performing loans Furthermore, global banking industry is on the threshold of a change and banks are propelled by industry trends, engaged customers, emerging technology tools, evolving sales channels and new competitors In order to receive Romania s banking executives input on the likely changes in the banking industry and their expected impact, A.T. Kearney has executed the Future of Retail Banking in Romania survey with the support of EFMA between April-May executives from 15 out of Romania s 20 largest banks have responded to the Future of Retail Banking in Romania survey Source: A.T. Kearney Y8YbtcQklln07kHyQ1 3

4 Executive summary Executive summary (2/2) Survey revealed that 5 key drivers are shaping the retail banking landscape Mobile web and social media Payment reloaded Customers private data is expected to increase in importance, complementing the financial data Almost all online social network (OSN) models mobile technologies in retail banking is expected to commercialize by 2020 both in sales & service Emerging payment technologies such as e-wallets and mobile payments are expected to mostly steal share from cash, while plastic cards will survive Changing customer preferences Point of sale revolution New players Standardization, driven by transparency need is anticipated to put pressure on banks differentiation Advisory might be a fundamental way to fight back standardization In a context of low bank confidence, security and trust are considered must-have, differentiating characteristics, followed by product simplicity and convenience Future branches are expected to have as main role to re(gain) customer trust Retail banks state they will respond to non-bank competitors threat on their own and will not collaborate with them Source: A.T. Kearney Y8YbtcQklln07kHyQ1 4

5 Agenda Executive summary "Future of Retail Banking in Romania" survey Methodology and scope Survey results Y8YbtcQklln07kHyQ1 5

6 Methodology and scope We considered five major drivers that are expected to massively influence retail banking in the upcoming 10 years Areas of influence Customer Demographics New technology Future of the branch Competition 1 Mobile web and social media Drivers Payment reloaded Changing customer preferences Point of sale revolution 5 New Players We conducted the Future of Retail Banking in Romania study to test the hypothesis for the Romanian retail banking landscape by 2025 Y8YbtcQklln07kHyQ1 6

7 Methodology and scope Future of Retail Banking in Romania survey represents the feedback of executives from 15 out of Romania s 20 largest banks Overview of respondents profiles Roles Manager 20% Other 24% Board member Functions Others 34% 3 Top management Director 36% Participants roles 10% CEO 8% CFO/CTO/COO/CIO/CMO Digital channels 4% 4% IT Finance Participants functions 8% Retail banking Commercial banking 16% Company size (Assets in RON) Less than 10 bn 15% 10 to 20 bn 25% More than 20 bn 60% 5% 1. A total of 50 executives responded to the survey Y8YbtcQklln07kHyQ1 7

8 Agenda Executive summary "Future of Retail Banking in Romania" survey Methodology and scope Survey results Y8YbtcQklln07kHyQ1 8

9 Survey results Future of Retail Banking in Romania Survey 2014 revealed 8 main trends that are expected to shape the industry Drivers and trends from the Future of Retail Banking Survey 2014 Drivers Mobile web and social media Payment reloaded Trends Customers private data is expected to increase in importance, complementing the financial data Emerging payment technologies such as e-wallets and mobile payments are anticipated to mostly steal share from cash, while plastic cards will survive Almost all online social network models and mobile retail banking technologies are expected to commercialize by 2020 both in sales & service Changing customer preferences Point of sale revolution 4 7 Standardization, driven by transparency need is expected to put pressure on banks differentiation 5 Advisory might be a fundamental way to fight back standardization Future branches are expected to have as main role to re(gain) customer trust 6 Security and trust are considered must-have characteristics New players 8 Retail banks state they will respond to non-bank competitors threat on their own and will not collaborate with them Source: A.T. Kearney Y8YbtcQklln07kHyQ1 9

10 Survey results Mobile web and social media Executives state that Romanian customers financial data will remain most important, but private data will also be valuable 1 Increasing importance of customers private data (% of respondents) Which of the following will be the most important success factors for retail banking in 2025? 21% 21% Until 2025, traditional retail banks that are not able to evaluate the client data will lose significant market share 58% Access to users former purchases, payment behavior etc. Access to customer s financial background Number of customers and thereof resulting economies of scale 95% 93% 8 Access to user data describing the customer s private interests, photos, friends etc. 80% Agree Neutral Disagree Driven by the standardization of banking products, increasing importance of customer data is likely to make customer analytics a key part of operations Y8YbtcQklln07kHyQ1 10

11 Survey results Mobile web and social media Analysis of customers private needs and emotions is expected to have an essential role in the development and evaluation of products 1 Increasing importance of customer analytics (% of respondents) 11% 13% By using sentiment analysis, retail banks in 2025 can offer products that fit perfectly customers situation and wishes 76% In 2025, sentiment analysis will be broadly used by retail banks to: analyze the common opinion about existing products analyze the bank s reputation design new retail banking products analyze the common opinion on the bank s consultants 91% 87% 84% 75% Agree Neutral Disagree In order to leverage this valuable tool, banks need to have an increasing focus on emerging channels that provide them with input in customer analytics Y8YbtcQklln07kHyQ1 11

12 Survey results Mobile web and social media As a source of private data, online social networks are expected to be central to banks in both marketing/sales and customer services 42 Rise of online social networks in retail banking (% of respondents) 10% both in marketing and distribution Online Social Networks (OSN) will play an important role in retail banking In 2025, OSN will be one of the most important marketing channels and in customer services 75% 10% 15% 88% In 2025, customer care & advisory via phone applications will be common 78% 11% 11% Agree Neutral Disagree Y8YbtcQklln07kHyQ1 12

13 Survey results Mobile web and social media Executives expect a rapid adoption of online social networks in retail banking, with major changes taking place until Timeline for the adoption of OSN in retail banking (% of respondents) 10% Online Social Networks (OSN) will play an important role in retail banking 88% The change is expected to take place relatively simultaneously in product distribution Retail banks will distribute products via OSN in the year: and in advisory services Advisory within OSN will be normal in the year: % % 48% 5% Agree Neutral Disagree The future retail bank will need to have its online social network platform and customer analytics approach ready within the next 5 years Y8YbtcQklln07kHyQ1 13

14 Survey results Mobile web and social media Moreover, customers are expected to require an integrated banking experience across channels, with mobile having the central role 42 Rise of mobile technologies in retail banking (% of respondents) Cross-channel synchronization will be critical 4% 11% In 2025, smart phones will be the central tool in retail banking and thereby (partly) replace the branch In 2025, customers handle their retail banking across devices which are permanently synchronized 91% putting pressure on the traditional retail bank 7% 85% Smart phone applications will open up new business models with threat potential for traditional retail banking business models 86% 1 Agree Neutral Disagree Increased use of mobile technologies is closely related to the use of online social networks, and may lead to a convergence between these two channels Y8YbtcQklln07kHyQ1 14

15 Survey results Mobile web and social media Therefore, a new Holistic view with intensive customer contact is anticipated to be the emerging trend in retail banking 42 Rise of Social Banking (% of respondents) Until 2025, the most promising retail banking business model will be: Holistic view on retail banking with intensive customer contact (through different channels, products etc.) 8 Pure direct banking (e.g. ING, DAB) with a focus on cost efficiency 61% Regional retail banking (with regionally oriented products) 58% Marketing oriented retail banking (no own products, more sales channel) Social Banking % 47% Other 15% By using elements of OSN and mobile technologies, Social Banking is expected to further enhance the integration between these two channels Y8YbtcQklln07kHyQ1 15

16 Survey results Payment reloaded The perception regarding ewallets completely replacing plastic cards is not very strong 3 New payment technologies (% of respondents) Percentages of offline payments (not e-commerce) executed through the following methods in 2025 will be: Cash 75% 20% 39% Cash card 71% 19% 7% 48% ewallets will completely replace plastic cards Debit card 27% 50% 20% Credit card 30% 51% 19% 13% Smartphones with NFC chips in combination with E-Wallets Mobile payments via online payment systems 23% 28% 41% 4 30% 23% 7% 7% Agree Neutral Disagree 0-25% 25-50% 50-75% % However, executives believe that combined use of mobile payments and ewallets will replace the share of cash Y8YbtcQklln07kHyQ1 16

17 Survey results Changing customer preferences Rising transparency demand is likely to standardize products and increase pressure on banks differentiating factors 4 Standardization driven by transparency demand (% of respondents) Increased transparency demand will require action from banks Retail Banks will increase transparency of products and services 94% 4% Until 2025, customers demand for transparency will increase which will lead to more standardization and comparability across banks sales and distribution channels Transparency will be realized through standardized products 79% 15% 6% 96% Transparency will be realized through easier comparison enabled by technology 94% 6% Agree Neutral Disagree Y8YbtcQklln07kHyQ1 17

18 Survey results Changing customer preferences The standardization pressure in products is especially strong for larger banks due to their larger client base 4 Standardization pressure by bank size (% of respondents) 15% Overall 6% Transparency of retail banking and products will be realized through standardized and easy to understand products 79% By bank size Large Mid Small 20% 11% 4% 13% 20% 85% 67% 80% Highlights Large banks put much more emphasis on product and services standardization compared to mid-sized banks This might be due to the fact that they have a much larger client base and are most in need to standardize and simplify their products to retain customers Small banks also stress the importance of product standardization, potentially as a mean to control costs Agree Neutral Disagree Y8YbtcQklln07kHyQ1 18

19 Survey results Changing customer preferences Banks can focus on advisory to mitigate the risk of losing direct customer contact and turning into standardized product suppliers 5 Rise of advisory in retail banking (% of respondents) Banks will counteract to retain their customers with trust 51% By 2025, banks will lose customer contact, new competitors will be intermediaries between banks and customers offering advisory and sales services 11% 38% Until 2025, retail banking advisory and sales will be separated to (re)gain trust and will use new digital tools to keep customer contact in advisory Web-based applications will be the most important sale and advisory tools for retail banking 49% 20% 31% 73% 16%11% Agree Neutral Disagree To succeed under the standardization pressure, banks need to better understand customers key expectations Y8YbtcQklln07kHyQ1 19

20 Survey results Changing customer preferences Regardless of bank size, executives believe that trust & security will be the key differentiating factors in future s retail bank 6 Most important attributes of a future retail bank (% of responses) 13% 1 13% Overall 7% As a customer, the most important attribute of a retail bank in 2025 will be: 14% 21% 18% By bank size Large 1. Trust 2. Security 3. Product simplicity Mid 1. Trust 2. Security 3. Convenience Small 1. Security 2. Trust 3. Personal contact Highlights Larger banks also focus on simplicity, potentially because they view this as one of their challenges Mid and small-sized banks deem as important the aspects by which they may be able to differentiate: Convenience for mid-sized Personal contact for small banks Trust Security Product simplicity Convenience Product transparency Cost Personal contact Other Besides trust and security, the most important perceived attributes by bank size tend to be their current potential differentiators Y8YbtcQklln07kHyQ1 20

21 Survey results Changing customer preferences Hence, ability to manage online security concerns and to position as trustworthy institutions is going to be critical for the future s retail bank 6 Most important attributes of a future retail bank (% of responses) 7% Part of overall security topic, online security is a critical concern 13% 1 As a customer, the most important attribute of a retail bank in 2025 will be: 21% 18% Until 2025, online security will limit new business model opportunities Agree 75% 16% 9% Neutral Disagree Despite increased popularity of social networks, trust in the Bank is not expected to diminish 13% 14% In 2025, trust in Facebook Friends is higher than Trust in the institution Bank 27% 21% 5 Trust Product simplicity Product transparency Personal contact Security Convenience Cost Other Y8YbtcQklln07kHyQ1 21

22 Survey results Point of sale revolution Traditional branches are expected to undergo major changes, yet they are expected to be/remain central for gaining customer trust 7 Disruption of branches (% of respondents) 8% 4% In 2025, retail banking branches will be a central and important channel to (re)gain trust 7 11% 17% Until 2025, retail banking branches will completely change regarding their look, devices, processes etc. In 2025, retail banking branches will be cashless and will have a representative role to increase emotional bond to the bank 50% 15% 35% 88% In 2025, most retail banking branches will be replaced by self-service counters 34% 13% 53% Agree Neutral Disagree To mitigate the risk of over-automation, future branches will need to include an emotional element in order to strengthen customers attachment Y8YbtcQklln07kHyQ1 22

23 Survey results New players Executives expect a tough competition from new players but are less confident that banks will react & maintain their shares 8 Non-banking competition (% of respondents) 11% 15% Until 2025, new competitors (e.g. telecom, IT) will become a major threat for established players in retail banking 74% New competitors rather attack single aspects of retail banking, instead of building up a new universal bank Traditional retail banks will react quickly to the threat and will maintain their market share 87% 55% 16% 29% 13% Agree Neutral Disagree Y8YbtcQklln07kHyQ1 23

24 Survey results New players 65% of banking executives state they are not likely to collaborate with non-bank players 8 Non-banking competition retail banks likely reaction (% of respondents) By bank size Highlights 23% 26% 13% Large 61% Banks willingness to cooperate with non-bank competitors is lowest for large banks 1 Until 2025, traditional retail banks will react on the threat of new competitors by: 65% 20% Mid 13% 67% The preferred do-it-myself approach for large banks is building their own digital channels, possibly due to the fact that they have more resources "Will do it myself and not cooperate" 1 "Will cooperate with new competitors" Other (incl. focus on "core competences") 20% Small 80% For mid and small-sized banks the preferred reaction is lobbying for stricter regulations for non-bank competitors 1. Will do it myself and not cooperate includes cases of building their own digital channels, acquiring new players or lobbying for regulation against new competitors Y8YbtcQklln07kHyQ1 24

25 Ready for discussion? Which of these trends do not match with today s Romanian market reality?? Which bank in Romania is today best prepared to master the upcoming challenges? How would non-banks answer these trends to change the market? Y8YbtcQklln07kHyQ1 25

26 A.T. Kearney is a global team of forward-thinking partners that delivers immediate impact and growing advantage for its clients. We are passionate problem solvers who excel in collaborating across borders to co-create and realize elegantly simple, practical, and sustainable results. Since 1926, we have been trusted advisors on the most mission-critical issues to the world s leading organizations across all major industries and service sectors. A.T. Kearney has 58 offices located in major business centers across 40 countries. Americas Atlanta Bogotá Calgary Chicago Dallas Detroit Houston Mexico City New York San Francisco São Paulo Toronto Washington, D.C. Asia Pacific Bangkok Beijing Hong Kong Jakarta Kuala Lumpur Melbourne Mumbai New Delhi Seoul Shanghai Singapore Sydney Tokyo Europe Amsterdam Berlin Brussels Bucharest Budapest Copenhagen Düsseldorf Frankfurt Helsinki Istanbul Kiev Lisbon Ljubljana London Madrid Milan Moscow Munich Oslo Paris Prague Rome Stockholm Stuttgart Vienna Warsaw Zurich Middle East and Africa Abu Dhabi Dubai Johannesburg Manama Riyadh Y8YbtcQklln07kHyQ1 26

27 As a global not-for-profit organisation, Efma brings together more than 3,300 retail financial services companies from over 130 countries. With a membership base consisting of almost a third of all large retail banks worldwide, Efma has proven to be a valuable resource for the global industry, offering members exclusive access to a multitude of resources, databases, studies, articles, news feeds and publications. Efma also provides numerous networking opportunities through working groups. Y8YbtcQklln07kHyQ1 27