Trends Shaping the Bank of the Future MBA Bank Management and Directors Conference November 30, 2017 Timothy Reimink Managing Director 2017 Crowe Horwath 2017 Crowe Horwath LLP 1LLP
This presentation was developed for the Michigan Bankers Association 2017 Crowe Horwath LLP 2
Today s Session Considering the staggering changes in banking we ve experienced over the last decade, it s safe to say predicting what will happen next is like trying to guess who is going to win the World Series. We can make some educated guesses, but to really hammer the metaphor home there s always a chance a curve ball is thrown our way. 2017 Crowe Horwath LLP 3
Topics: Trends and Responses Regulation Legacy Consolidation Niche Focus Data Customers People Innovation Optimization Digital Competition 2017 Crowe Horwath LLP 4
Trend: Customer Base is Changing Expectations Amazon Service Fairness Regulation Legacy Generational Differences Financial Needs Financial Confidence Values Data Customers People Income and Wealth Wide Income Differences Drawdowns of Wealth Wealth Transfers Loyalties Diverse Persistent Digital Competition 2017 Crowe Horwath LLP 5
Driving Loyalty It is painful to change habits and difficult to understand how everyday actions will impact longterm outcomes while in the process of deciding on those actions. So customers value firms that use new digital capability to routinely intervene and help them stay on track (Figure 6) either by automating important tasks that are so difficult or unpleasant that they foster procrastination, or by showing the customer how everyday decisions will impact goal attainment. Source: CEB - The Digital Tipping Point 2017 Crowe Horwath LLP 6
Trend: Legacy is Hindering Cost Structure Real Estate Personnel Regulation Legacy Technology Data Customers People Core System Providers Integrations People Habits Skills Brand Image Relative top of mind position Digital Competition 2017 Crowe Horwath LLP 7
It is less about Where and more about How Facility Market Products Location People Customers If we build it, they will come. Technology People Market Customers Products Facility Location If we are helpful, they will use us. Technology 2017 Crowe Horwath LLP 8
Trend: People Needs are Changing Capabilities New Skills are needed Competing for Talent with Other Industries Regulation Legacy Expectations Data Customers People Work-Life Balance Meaningful Work Do Good Digital Competition Generational Change Management Succession Stockholder Changes 2017 Crowe Horwath LLP 9
Trend: Competition is more Diverse and Worrisome Banks Large banks are increasingly stronger competition Limited brand differences between community banks Regulation Legacy Credit Unions Data Customers People Strong brand image Cost advantages Non-Banks/Fintechs Getting between customer and the bank Broad menu of capabilities Big Brands Potential Impact of the Wal-Marts and Apples Digital Competition 2017 Crowe Horwath LLP 10
Trend: Banking is becoming Digital First Mobile Interactions Most interactions with bank are through digital device Bank location agnostic Regulation Legacy Streamlined Processes Paperless Automated Data Customers People User Experiences Intuitive navigation Readily available assistance 24/7 Accessibility Purchase Process Purchase process begins on web Driven by brand and information Digital Competition 2017 Crowe Horwath LLP 11
Four Modes of Banking Person-to-Person Banking Team members located in the communities served who handle banking needs of customers they know, being agnostic as to specific location Digital Banking Online and mobile applications fully supporting banking needs electronically, including payments, online lending and account opening Contact Center Team members interacting by phone, mail, email, social media, IM and chat with extended accessibility Product Specialists Mortgage originators, wealth advisors, insurance agents, etc. handling specific needs of customers either in-person or remotely Person-to-Person Banking Contact Center Markets Served Target Segments Digital Banking Product Specialists 2017 Crowe Horwath LLP 12
Trend: Data and Information are Key Resources Process Efficiency Data enables automation and service Process improvement relies on information Regulation Legacy Customer Insights Demographic and Product Profile Transactions and Activities Data Customers People Predictive Analytics Proactive offers and retention Targeting of sales and marketing Loss prevention Data Governance Data quality is important Structure and tools needed Digital Competition 2017 Crowe Horwath LLP 13
Trend: Regulatory Burden is Continuing Continued Scrutinity Capital and Liquidity Management Strength Enterprise and Credit Risk Management Increasing Focus Regulation Legacy Data Customers People Data Security Infrastructure Security Vendor Management Digital Competition Change and Uncertainty Consumer Protections Innovation Responsiveness and Flexibility 2017 Crowe Horwath LLP 14
Responses 2017 Crowe Horwath LLP 15
Response: The Industry is Consolidating Buyers seeking critical mass, economies of scale and growth opportunities Seller unwillingness or inability to make investments in platforms, technology and people Consolidation Niche Focus Diverse strategies, including in-market, new market, branch sales, credit unions, etc. Innovation Optimization 2017 Crowe Horwath LLP 16
Response: Banks are Finding Competitive Niches Small Markets Product Specialists Consolidation Niche Focus Customer Segment Focused Customer Relationship Managers Innovation Optimization Owner Mission-driven 2017 Crowe Horwath LLP 17
Response: Working to Optimize Their Performance Managing for a stronger organization and improved performance. Enhancing competitive and product capabilities to take on competition directly. Benchmarking and learning from others and leading practices Making investments and tough choices to address legacy Consolidation Innovation Niche Focus Optimization 2017 Crowe Horwath LLP 18
Strategic Considerations How do we manage teams to improve customer satisfaction, revenues and profits? Managing Cost Structure How do we cost effectively provide service which differentiates us? Managing Performance Building the Relationship What roles do each channel play in delivering customer value? Coordinating Channels Operating Model Choosing Locations How do we productively increase customer trust, product usage, revenues and balances? How do we use technology, physical layout, automation and merchandising to enhance customer experience and channel productivity? Configuring Delivery Where are the optimal locations for visibility, convenience and profit? 2017 Crowe Horwath LLP 19
Response: Seeking Innovation Changing product and service offerings Applying innovation to back office processes Consolidation Niche Focus Leveraging relationships and loyalty Partnering for advantage Innovation Optimization Adopting a Change and Innovation Mindset 2017 Crowe Horwath LLP 20
What is needed for a Change and Innovation Mindset? Future Orientation Focus on Customer Risk Tolerance Experimentation Resource Commitment What will be needed Not what we have always done Preferences Behavior Values Goals Problems Journeys Top Down Bottom Up Cost/Benefit Pilots Tests Comparisons Failure as Learning R&D Budget Small investigations Ramped up successes 2017 Crowe Horwath LLP 21
Take Aways 2017 Crowe Horwath LLP 22
Trends and Responses Regulation Legacy Consolidation Niche Focus Data Customers People Innovation Optimization Digital Competition 2017 Crowe Horwath LLP 23
Takeaways Banking is at a critical transition point It s about How we bank, not Where we bank Digital and Data are the big D s for the industry Customers and People are driving the need for change We have a variety of Choices to make in response 2017 Crowe Horwath LLP 24
Thank you For questions or further discussion, contact: Timothy Reimink Managing Director Bank Performance Consulting Group Crowe Horwath, LLP 616.774.6711 timothy.reimink@crowehorwath.com In accordance with applicable professional standards, some firm services may not be available to attest clients. This material is for informational purposes only and should not be construed as financial or legal advice. Please seek guidance specific to your organization from qualified advisers in your jurisdiction. 2017 Crowe Horwath LLP, an independent member of Crowe Horwath International crowehorwath.com/disclosure 2017 Crowe Horwath LLP 25