Lecture Materials RETAIL BANKING Virginia Heyburn Vice President, Strategic Pursuits Fiserv virginia.heyburn@fiserv.com Miami Beach, Florida 786-239-4898 August 8, 2017
Vision 2020: Growing the Banking Franchise in a Digital World Virginia Heyburn VP Strategy Technology is Driving Industry Transformation #1 #2 #3 #4 #5 2001 $406B $365B $272B $261B $260B 2011 2006 $446B $383B $327B $293B $273B 2016 $406B $376B $277B $237B $228B $582B $556B $452B $364B $359B Source: Visual Capitalist, The Largest Companies By Market Cap Over 15 Years, August 2016 *Top 5 By Market Cap Tech Other 1
Disruptors are Changing the Banking Landscape Banks Tech Firms 44% 40% 73% 71% 37% 36% 64% 57% Source: Instantly Brand Monitor in Cooperation with Statista, Americans Trust Tech Firms More Than Banks for Finance, June 2015 *Original Question: Please state for each firm you know whether your overall opinion of the provider of financial products is positive, neutral, negative. Banks Have an Innovation Gap to Bridge Consumer Perception of Innovation Brands of Innovators vs. Banks and Payment Networks 140% 120% 100% 80% 60% 40% 20% 0% 106% 44% 37% 30% 133% 118% Innovation Gap 31% 34% 22% 27% 20% 19% 2011 2013 2014 Top 5 Banks Top 3 Carriers* Top 4 Payment Networks* Gang of 5 Note: Networks are carriers are normalized for 5 firms for comparison Note: Gang of Five consists of Apple, PayPal, Samsung, Google, and Amazon Source: Javelin Strategy & Research 2015: Gang of Five: Apple Pay vs. Android Pay vs. Samsung Pay vs. PayPal Pay?, March 2015 n=5,878, 6,651, 3,200 2
Key Takeaways 1. Technology Innovation is transforming all industries, including banking 2. Digital transformation is opening doors to new competitors with a clear vision of fast and simple 3. Millennials are voicing new preferences and service expectations shaped outside financial services Five Game Changers in Banking The Digital Triad ONE Experience Move Money Mobile Now Bank of Things 3
Game Changer #1: The Digital Triad We spent a lot of years training banking customers on our terminology: Digital Strategy for an Always-On World DDA, ACH, Routing number, PIN, Wire, Bill Pay This new generation of customers doesn t care. Deposits Money Payments Service Loans Consumers Value the Merits of Non-Banks Sources: Accenture, Capgemini, Salesforce.com 4
Unbanked by Choice is a New Phenomenon Most Important Reason for Not Having a Checking, Savings or Money Market Account Don't Have Enough Money Don't Need or Want an Account Refused to Answer 15% Banking History, Credit or ID Problems 10% I Wouldn't Use an Account Enough 8% Other 7% I Don't Like Dealing with Banks 6% The Fees are Too High or Unpredictable 2% I Cannot Manage/Balance an Account 2% Banks Don't Offer the Products or Services I Need 1% Banks Do Not Have Convenient Hours or Locations 1% 0% 20% 25% 24% Source: The Federal Reserve System, Consumers and Mobile Financial Services 2014, March 2014 Why Should New Entrants Matter to Banks? The Branch is Alive and Well 87% of consumers will use their branches in the future and want human interaction when they go there Value is Important 45% of consumers say the top reason they would stay loyal is if their bank offers discounts on purchases of interest Robo-Advice is Welcomed 46% of consumers are willing to bank using robo-advice in the future Switching FIs is Not an Obstacle 11% of consumers left their bank in the past year and consumer switching to virtual banks is at double-digit levels Source: Accenture 2016 North America Consumer Digital Banking Survey - Banking Shaped By The Customer, June 2016 n=>4,000 5
Game Changer #2: ONE Experience Continue Finish Initiate Seamless movement across touchpoints One experience, multiple engagements New: Chat/App/Voice/Augmented/Virtual Reality Transformed Branch 6
Banks Must Innovate or Lose Profitable Accounts Total U.S. Deposit Accounts (in Millions), 2010-2Q16 Number of Accounts 900 800 700 171 173 178 183 189 196 200 600 500 400 300 595 611 634 624 613 579 581 200 100 0 2010 2011 2012 2013 2014 2015 2Q16 FDIC-Insured Credit Unions *May exclude Savings Institutions Prior to 2012 Source: FDIC: FFIEC Call Report 2Q16 and NCUA Call Report 2Q16 Millennials to Inherit $59 Trillion in Personal Wealth 2030 Source: Visual Capitalist, How Affluent Millennials are Changing the Finance Industry, December 2015 7
Key Takeaways 1. Banks must focus on deposits, payments and loans as part of a digital triad strategy or risk market share erosion 2. Millennials are ten times more likely to switch their financial institution than older generations 3. Consumers are demanding a consistently fast and simple experience across multiple touchpoints/channels. Game Changer #3: Move Money who how much when Invisible payments Payments apps Interoperable networks Sender s Bank Payment Network Receiver s Bank Sender Receiver 8
Today s Payment Reality is Fragmented People have numerous payment relationships, but they manage them separately.. Speed is the New Black Relative size of words reflects the frequency with which the future of electronic billing and payment was described in one word by industry analysts from Aite Group, Celent, Forrester, IDC Financial Insights, Javelin Strategy & Research and Mercator Advisory Group. 9
New Players Proliferate Consumers have increasing choices for all financial services. Large Tech Companies a Clear Threat in Money Movement 10
Primary Bank No Longer the Top Preferred Mobile Wallet Provider Likelihood of Choosing Company as a Mobile Wallet Provider PayPal 34% Visa 22% 27% Your Primary Bank MasterCard 28% 25% 37% American Express 25% 20% 34% Apple Pay 28% 20% 34% Android Pay 31% 24% 29% Microsoft 21% 19% 27% Starbucks 17% 16% 25% Facebook 14% 13% 22% MCX CurrentC 16% 16% 63% 42% 56% 51% 45% 43% 48% 2015 2014 2013 0% 10% 20% 30% 40% 50% 60% 70% Source: JAVELIN, What s In Your Mobile Wallet?, March 2016 Game Changer #4: Mobile Now What do you want to do? becomes What can we do for you? 11
Who Will Own Financial Conversations? 23 Game Changer #5: Bank of Things Home purchase Auto purchase Hyper-competitive, hyper-connected Network interoperability Artificial Intelligence for personalized service Bank creates customer routine Car insurance College choice Partner and collaborate Aggregate data with all partners Build interconnected network beyond traditional bankowned channels innovation 12
The Internet of Things The Internet of Things (IoT) describes the phenomenon of everyday devices connecting to the Internet through tiny embedded sensors and computing power. Accenture Ways to Defend and Succeed Against Non-FI Threats Focus on Digital Lead in Customer Experience Invest in Sustainable Innovation Leverage Established Position of Trust Digital First All Form Factors Digital Sales Simple and convenient Easy and always on Zero tolerance for defects Build, Buy, Partner, Fund? Build innovation teams Choose WHERE to innovate Innovate Faster Consumers trust FIs more than non-fis Advantage FIs: established relationships with regulators 13
Key Takeaways 1. The payments landscape is transforming with new technology capabilities 2. The biggest trend in payments is that payments are becoming invisible. 3. Mobile is the most important customer touchpoint for both transactions and sales Five Game Changers in Banking The Digital Triad ONE Experience Move Money Mobile Now Bank of Things 14
Thought for the Day: The only thing changing faster than technology is consumer expectations Thank You! 15
Vision 2020: Growing the Banking Franchise in a Digital World Virginia Heyburn VP Strategy 16