FinTech: THE CONSUMER PERSPECTIVE AND HOW IT WILL AFFECT PHYSICAL DISTRIBUTION Ian Goodliffe, Partner, CACI Retail Banking Innovation Conference February 2016
INTRODUCTION Digital transformation is happening in our daily lives banking is no different This has implications for investment across the 4 Ps: PEOPLE PLACES PRODUCTS PLATFORMS BUT things are not equal to all People and this means the other Ps need to be structured accordingly 2
THE WAY WE BANK IS CHANGING TOTAL CURRENT ACCOUNT INTERACTIONS: Source: CACI Channel Impact. An Interaction = one branch visit; one answered call; one login 3
TOTAL CUSTOMER INTERACTIONS TOTAL CURRENT ACCOUNT INTERACTIONS: Source: CACI Channel Impact. An Interaction = one branch visit; one answered call; one login 4
MORE WAYS TO BANK THAN EVER BEFORE TECHNOLOGY/BEHAVIOUR Digital banking is becoming increasingly popular, both on mobiles, tablets and desktop computers. Access is driven by both by internet availability and willingness to adopt new technology PHYSICAL ACCESS Bank branches are still pivotal for customers but there are a number of other ways to bank now including through the Post Office, ATMs, mobile bank branches, and cash back facilities COMMUNICATION Communicating with your bank, now often 24/7, is easier than ever before including through telephone banking, SMS, email, online chats, and using social media such as Facebook or Twitter 5
RETAIL BANKING IS FUNDAMENTALLY CHANGING 6
ONE SIZE DOES NOT FIT ALL
THE EARLY ADOPTERS The first early adopters of digital banking were classified into one of three groups: Cash Rich, Time Poor Student-dominated free thinking towns Remote communities, using Mail Order since the 1970s Up to 50 miles from London along main motorways: M1; M3; M4; M11 Canterbury; Durham; Lancaster; St Andrews Cornwall; Highlands & Islands of Scotland; North Yorkshire Source: CACI Ocean; research using real bank customers from our clients (c25 million individuals) 8
A MORE SOPHISTICATED VIEW IS REQUIRED Teamed up with the well-respected Research organisation GFK to pool data on the emerging banking behaviour in the digital world CACI Econometrists and Statisticians ran forecasts for future banking behaviour for all channels based on this data We also compared to published sources on more general digital trends Finally we reviewed the output with our banking clients and got their feedback 9
IT S DIFFERENT BETWEEN SALES AND SERVICE Transactions first New Accounts catching up Convenience Cost But not all products are the same 10
IT S DIFFERENT BETWEEN PRODUCTS CURRENT ACCOUNTS: SAVINGS ACCOUNTS: 90% 45% 85% 71% of all transactions will be digital by 2020 of new accounts will be digital by 2020 of all transactions will be digital by 2020 of new accounts will be digital by 2020 11
FORECAST: CURRENT ACCOUNT MANAGEMENT Mobile logons per individual by Fresco Segment 2015 & 2020 Mobile Log-ons per Individual, by Fresco Segment, 2015 & 2020 Still At Home Starting Out Rising Metropolitans Poorer Parents Working Singles & Couples Home-Owning Families High Income Professionals Older Working Families Mid-Life Social Renters Asset Rich Greys Road To Retirement Low Income Elderly OVERALL GROWTH: 150% INCREASE: +1.5 BILLION LOG-ONS 12
2015 2020 High Income Professionals: TRANSACTIONAL BEHAVIOUR % of individuals using each channel to manage their current accounts 8% branch 5 branch visits a branch 2 will open a new visits a year year 2visits a year current account this year 39% 59% 70% 31% 80% 56% 36% 25% 13
2015 2020 Road to Retirement: TRANSACTIONAL BEHAVIOUR % of individuals using each channel to manage their current accounts 2% branch 12 branch visits a branch 2 will open a new visits a year year 9visits a year current account this year 10% 69% 46% 20% 53% 61% 46% 17% 14
High Income Professionals: BUYING BEHAVIOUR % of new savings accounts coming via each channel Digital 53% 4.1bn Phone 0.7bn 9% 2.9bn Branch 38% 2015 2020 Digital 6.8bn Phone 0.4bn 5% 77% 18% 1.6bn Branch Annual new savings deposits are typically worth 16K Assumes an annual growth rate for this segment of 2.0% (source: CACI Channel Impact) 15
Road to Retirement: BUYING BEHAVIOUR % of new savings accounts coming via each channel 2.8bn Digital 31% Phone 0.9bn 6% 10% 36% 2015 2020 59% Branch 5.4bn Digital 5.9bn Phone 0.6bn 58% Branch 3.6bn Annual new savings deposits are typically worth 6K Assumes an annual growth rate for this segment of 1.5% (source: CACI Channel Impact) 16
KEY TOWNS FOR EACH SEGMENT VERY DIFFERENT PLACES HIGH INCOME PROFESSIONALS Examples Guildford Harrogate Kingston Solihull Winchester ROAD TO RETIREMENT Examples Blackpool Eastbourne Great Yarmouth Scarborough Torquay Source: CACI Locality Market Geography
VALUE PER CUSTOMER A DIGITAL LIFE vs. FS VALUE: TARGETING THE RIGHT PEOPLE WILL BE ESSENTIAL DIGITALISATION: driven by a range of factors: smartphone/tablet ownership; app usage; online shopping behaviour; social media engagement etc. VALUE: driven by products & balances, cost not included high low low DIGITALISATION OF THEIR LIFE high 18
SO WHAT? Technology might make geography less relevant, but it doesn t make demographics or socio-economic factors any less important There is only ONE Customer and Demand is FINITE An optimal distribution strategy has to be a balanced distribution strategy - balanced across Channel; from a Sales, Service and Communication perspective 19
IN CONCLUSION Banking is changing as a result of technology and consumer requirement Pace of change isn't equal across the country, as the biggest driver of consumer behaviour is demographic Branches will still be important as "brand anchors and will need to change their format, purpose and location to stay relevant Banks should optimise their future distribution effort based on a bottom-up appraisal of the local needs from physical and digital assets 20