Cup Moscow 2014
Strategy for Setting Up the Middle Class
BusinessDucks Kulish Alina Kazankova Evgenia Lisienkova Tatiana Kiseleva Natalia
Business Ducks
Strategy review
Client Portfolio
Our customer-centric strategy includes knowing the customers, looking out for them and rewarding them Developing client segmentation
Our strategy
According to AS IS analysis we propose strategy aspects which aim to improve 4 major Key Performance Indicators
Services
Products
New and developed products New and developed services Marketing campaign
AS IS
3 strategy aspects aim to
Results
Appendix
Build loyalty and activity of existing clients
& Attract new clients
Key performance indicators Products:
AlfaBank current income sources:
Major trends: According to BCG, commission income is the potential accelerator of bank income growth Passives are the most profitable channel for Alfa Loans due to current crisis in Russia become more and more risky for bank
Channels
“Business Life” Package “Smart investor” Package “People like YOU“ “Sudden” Package Deposits
Services: Personal Advisory Online Tool Personal Manager Cross Border Banking
Marketing: Bank as investor Book of Marvels Law Agencies Support Assets Management Seminars P.O.S Salary Cards Online marketing
Affluent and MassAffluent Share in AlfaBank Portfolio
Financial products per client
Active clients in Affluent and MassAffluent sectors
up to 55% 2014
2017 +1 product
2014
2017 more 10%
2014
2017 up to 80
Client Loyalty Index 2014
2017
Business Ducks
Strategy review
Mass-affluent
massaff.>2.5 М р. affluent >20М р.
Client Portfolio
Services
Products
Channels
Client in 2017 *
Results
Appendix
Affluent
Young professionals (Looking to simplify their lives)
Used to be mass
Established professionals & families (Assuming more Responsibilities)
Prefer online channels
Interested in mortgage and car loans, saving for children’s education. May share aggregated bank account for the whole family Ivolvment into overall expenditure, its monitoring and adjustment.
Prefer face-to-face communication with personal manager
Pre-retirees (Planning for Retirement)
Interested in investment, need some online advice
Prefer to buy from recognized and trusted entities. Look for advice. Are ready to start saving significant share of income for secure and provided post-retirement life.
Ready to invest free assets into postretirement life, need personal advisor
Retirees (Preserve Wealth)
Need to preserve weatlh and split the budget carefully
Generally are prone to preserve wealth, rather than to grow assets. Tend to consolidate assets in one bank. Care about legacy. Require consultancy about managing finance or new products.
May be interested in investments
Suddens (got sudden sum of money and no idea what to do with it)
Have defined, expense items (eg. credit debt, flat renewal, travelling)
Lack of the knowledge and experience concerning investments. Human contacts to consult regarding asset/wealth management. Usually it takes around 1 year to decide how to spend sudden money.
Bankers’ wives (are mostly households)
Cashback shopping, health &beauty events
Manage finaces according to husbands advice. Cannot invest effectively, but spend effectively. May involve husband into class ivents thus prompt them to cooperate with a bank more.
Due to busy life-style they value products that simplify life. Tech savvy and tend to be self directed. High useage of investment & credit products.
Used to be massaffluent
Have more opportunities to invest but no tool/bank for that
Enjoy private clubs and events for socialite
Clients 2017 were segmented according to their preferences, needs and income so as to step away from product pushing and strive to understand the current needs of each customer based on his/her individual circumstances * BAI Executive report (march 2014) Engaging and retaining Mass Affluent Customers
Strategy review
Business Ducks
Client Portfolio
Services **
Mass-affluent
Somewhat conservative October 2011
July 2010
Before 2008
0%
Very conservative
Cross Border Banking (collaboration with banks in countries of customer’s interest) Forecast (2017)
Now
< 500000 euro
Treatmen t
Prestige
Business Trip
10,80% 10,10% 4,50% 1,20% Children Life
Residenc e
Purchase Purpose
Real Estate market changes in 2017: 1. Demographic changes create new market niches (Africa, Asia, South America). 2. Major players from developing countries. Construction Volume 28% 72%
Real Estate Cost 38,10%
28,50%
18,40%
500000 - 1,5 - 3 mln 3 - 10 mln 1,5 mln euro euro euro
Important for (Mass) Affluent: • Best tax treatment • Prestigious location • Proximity to banks with private assets
5,60% > 10 mln euro
Main directions** according to costs: Bulgaria, Thailand, Turkey, Greece, Spain, Portugal, Montenegro so on.
India, China, Indonesia, Mexico, Russia, USA and Canada Others
3. Environmental standard’s role going up. 4. Real estate role as in investment tool going up. Opportunities
39,80%
Investma nts
42,40% 33,60%
Vacation
70,80%
Development of the market Investment tool, trl $ into new directions will let 101,7 63,9 Alfa-bank easily open new branches and foreign partners. Perspective: main cross bank 2014 2020 in Russia.
«Banking the (Mass) Affluent»
Technologies
Moderate
Appendix
Big Data - information about client, his financial position, transactions to develop suitable financial portfolio and support manager knowledge base.
Best practices
Very aggressive Somewhat aggressive
50%
No professional
Face-to-
help 1. Affluent prefer face-toFace 22% relationship 40% Consultations 34% face meetings with an advisor On-line 38% 66% 2. Affluent need guidance Advisor handle communica for me tion Manager recommends investment programs, 100% Deccumulation based on clients’ needs, Stage Clients 50% financial position, Accumulation expenditure, interests. Stage Clients 0% 3. Strong correlation between the age of Option of choosing a personal manager based on advisors and their client’s preferences to ensure closer relationships clients. <30 30-39 40-49 50-59 60+ All
Risk tolerance 100%
Results
Services are based on
Personal Manager
1. Recommendations of possible investment or credit programs, based on client’s assets and sphere of interest
3. Visualization of likely outcomes helps clients realize what impact of these investment on their well-being
Channels
Affluent
Personal Advisory Tool *
2. Mass affluent are rather risk-averse
Products
Omni-channels – assets management online using mobile app or site, without visiting band departments. Wealth Management –aspects of personal manager working process. Everyday bank – forecasting aspects of personal advisory tool.
* Personal Advisory Tool Interface (Offer client to Invest or buy product «People like YOU»)
Strategy, degree of engagement in host countries are based on adapting for market forecasting 2017. Alfa Bank useless (strategy perspectives): 1. 750000 R per month withdrawal ATM; 2. Dual currency conversation; 3. Work only with $ and euro; 4. Do not have foreign bank partners; 5. Divisions only in USA, UK and Netherlands; 6. Card may be blocked abroad. All risks are bore by the customer.
One Year CB program completed: Equity
69% 2014
2015
2014
2015
Efficiency
5%
** See full analytical resources in Appendix
Services aim to support clients wherever he is whatever he wants maintaining his loyalty and attracting new clients.
Strategy review
Business Ducks
Mass-affluent “Business Life” package* 1. 2. 3.
Mass-affluent values his time due to busy job. But he wants to be involved into financial decision making. He wants to use Innovative tools allowing visualization and appreciates rich digital experience.
According to BCG commission income is the potential accelerator of bank income growth
Main features which summarize mass-affluent needs: ➔ ➔ ➔ ➔
Client Portfolio
1. 2.
750K cash limit Standard/Gold credit cards Deposits in 3 currencies Online-consultant
3.
Sudden package
Results
Appendix
Usablility Improvement
“Smart investor” package* Main features which give affluent as much financial freedom as possible: ➔ ➔ ➔ ➔ ➔ ➔
1.25M cash limit Gold/Platinum credit card Deposits in 5 currencies Personal manager Private events Partners’ bonuses
Affluent deposits are the most profitable line of Alfa-bank business. Lower deposit rates attract more Affluent Rank
Based on Big Data customer segments analytics “People like YOU” suggests potentially beneficial proposals concerming: investment, real estate, assets storage, stock market.
6 months
Channels
Deposits**
“People like YOU”
transfer
Products
Affluent
He wants to be as close to VIPstatus as possible. Not ready to spend efforts to understand product himself. That’s why appreciates consultancy from personal qualified manager.
Subscription product “People like YOU” accumulates information about people with similar income, occupation and interests.
Inheritance
Services
Bank
1 PromSvyazBank
Omni-channels NFC Voice management Big Data - personal analytics Remote control of manager online
Deposit rate Min deposit (rub) 11,6% 5M
2
MDM-bank
11,5%
30K
3
Alfa-bank
11,0%
3M
Bank wants to accelerate clients’ financial decision-making process:
Opening an individual account
3 months
Development of investment plan
?
BANK’S TARGET
➔ ➔ ➔ ➔
Personal investor Personal manager (for Affluent) Investment seminars (for Mass-affluent) Alfa-bank “Basic” package
*see full package description in Appendix **see full deposit comparison in Appendix
Aim of new and advanced products is to maintain a competitive advantage over other banks and raise Alfa-Banks’ commission income.
Strategy review
Business Ducks
Client Portfolio
Services
Products
German share portfolio
Affluent Growth
↑20,3%
Corporations
Banks Inst agents
57%
27% 4%
Foreign Other
↑16,95%
3%
86
• Are traceable through law agencies • Depend on death and divorce rates
Common source of sudden wealth: • Inheritance • A divorce or lawsuit settlement • Lottery winnings • Sale of a business Death Rate
New clients
14,00
2015
13,00
2016
2017
20 000
Divorce Rate
81
80
(Mass) Affluent Offline
Law Agencies Support
“Karaoke ” friends Friend under same circumstanc es Introduced tax consultant
Assets Management Seminars
School friends
Manageme nt company Introduced lawyer
1. «Suddenly rich» lacks human contacts and participating communities 2. 70% of «suddenly rich» going to broke within a year of a windfall
10 000 Аffluent
Мass Аffluent
Appendix
Choose Choose
POS
1. Major products for Affluent and Mass-Affluent: ➔
Сars over 2M rub
➔
Mortgage
➔
Gold/Platinum credit cards
Online marketing Alfa-Bank online marketing campaign is alloted for entire real segment and is targeted to products rather than to potential customer
2017
Additional program of private events attracting new customers on the basis of the physical channel (magazines, personal envelopes)/ Growth of current clients loyalty.
2017
More new clients, more active current clients.
(Mass) Affluent Offline
12,00
Spending spare time by Affluent 33
2014
↑30,9%
2014
Mass Affluent Growth
Case information example of the banks personal investments in physical distributions (TV, magazines). Increased clients’ confidence in bank’s invest professionalism.
5,50 5,00 4,50 4,00
2017
Коллекуион ирование
2014
Individuals
Affluent Growth
Same interests
Клубные встречи
41%
Show others your investment
43%
Отдых
19%
Book of Marvels
Aim of visiting private events
Путешеств ия
6%
Affluent Offline
Bank as Investor
Results
Upgraded
New (Mass) Affluent Offline
Channels **
3. Consecutive seminars for people who are interested in assets management/investment or taxation 4. Establish reliable relations with clients
2. In P.O.S for affluent there is a point to focus on auto 3. Contracts with auto-dealers may make it cheaper for client to buy a car
(Mass) Affluent Choose
Salary cards
1. Due to Federation Council’s law Russians can choose wages bank themselves Willingness to change since 2015. salary bank 2. Part of wealthy employees are ready to switch bank to more comfortable in everyday needs
1. BIG DATA fulfills the necessity in extending segmentation, customising advertising to client’s needs
. 2.Contracts with Google and Yandex may represent personalised programmes according to client’s search
Are Don't ready to want to switch switch 39% 61%
3. Alfa-bank is ready to take into account personal client’s needs (not corporate’s ones like before).
Affluent and Mass-Affluent clients do rarely trust banners, so marketing strategy consist mostly from physical channels, simultaneously personalizing online tools.
Business Ducks
Strategy review
Road Map
Client Portfolio
Services
Products
Channels
Results *
Appendix
Results by 2017 Cost of Product Range Optimization
50K Rub
Cost of Service Optimization
50k Rub 60K per manager
Cost of Marketing Campaign Optimization
180K Rub 3k Rub per event
Total Affluent
74 694
Total Mass Affluent
230 000
Operational Income (Mass)Affluent
4 115 M Rub per month
Active clients in (Mass)Affluent sectors
61%
Total active affluent income
4921 M Rub
(Mass)Affluent Share in Alfa-Bank Portfolio
at least 54%
* See full calculations in Appendix, slides “Results. Income” and “Results. Costs”
Curriculum Vitae
Business Ducks
Teammates - Ducks
HSE, Business Informatics, 4th year student Google Business Case Competition 2014, Finalist Championship AlfaSparta, November 2014, Semi-finalist
HSE, Business Informatics, 4th year student Championship AlfaSparta, November 2014, Winner
HSE, Business Informatics, 4th year student Google Business Case Competition 2014, Finalist Championship AlfaSparta, November 2014, Semi-finalist
HSE, Business Informatics, 4th year student Competition «CIMA Global Business Challenge 2013» Russia, Finalist Business competition «CIMA Global Business Challenge 2014» Russia, 3d runner up
Appendix. Slide «Services».
Business Ducks
Additional Information Price category Low
I II
LowMiddle MiddleHigh High
III IV
Resources Personal Advisory Tool:
Residential Average price, euro
Countries
40-100 thousand
Bulgaria, Thailand, Turkey
100-250 thousand
Germany, Greece, Spain, Latvia, Finland, Montenegro, Czech Republic
250-500 thousand
Cyprus, Portugal, Croatia
500 th - 1,5 mln
Deloitte. The Mass Affluent Market Changed Perspectives
2500
2000
1500
1000
500
0 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 (2) (3) (4) (1) (2) (3) (4) (1) (2) (3) (4) (1) (2)
Spectrem Group research overview: Today’s affluent investors: insights and opportunities Accenture. The “Greater” Wealth Transfer: Capitalizing on the Intergenerational Shift in Wealth
Cross Border Banking
United Kingdom, Italy, USA, France
Number of housing purchases abroad by Russian habitants
Personal Manager:
Now
Forecast 2017
Analytical report Tranio.Ru: The most popular countries and regions for housing (2014) Analytical report Traino.Ru: Value of real estate, russian investments into foreign housing (2014) Importace for (Mass) Affluent report Traino.ru (2014)
Main tendencies and forecasting of real estate market for 10 years by Tranio.Ru (2014) Private capital is on going up for real estate budget in Russia (2014)
Making Cross-Border Banking Work for Africa Cross-Border Banking An Accenture Study of Cross-Border Mergers & Acquisitions in Banking By Bruce Kiene, David W. Helin and Brad Eckerd Alfabank.ru
Appendix. Slide «Products».
Business Ducks
Comparison of possible Deposits in Russian Banks according to Banki.ru
Bank Промсвязьбанк
Deposit Премиальный процент
Rate 11,6%
Min Sum 5000000
Term 3 года
Income 8322176
МДМ Банк МДМ Банк
Лидер МДМ – Доходный (в конце срока)
11,5% 11,35%
30000 1500000
3 года 2 года
8193417 6810000
Альфа-Банк Альфа-Банк Росбанк
Победа Премия 150 лет надежности
11% 11% 11%
3000000 3000000 4000000
3 года 3 года 3 года
7777544 6600000 6600000
Промсвязьбанк
Премиальный процент (мультивалютный)
10,9%
5000000
3 года
7736378
МДМ Банк
МДМ – Доходный (ежемесячно)
10,6%
1500000
2 года
7449146
МДМ Банк
МДМ – Пенсионный
10,6%
1500000
2 года
7449146
Россельхозбанк
Золотой (в конце срока)
10,6%
10000000
3 года
6360000
Business Ducks
Appendix. Slide «Products».
Business Ducks
Appendix. Slide «Products».
Appendix. Slide «Channels».
Business Ducks
Main Calculations
Resources
Bank as Investor Index
Book of Marvels
Affluent
Mass Affluent
Active clients
135 000
600 000
Active clients in investment activities Percentage of covered client interest investment by bank Client attracted into investment activities Total growth
101 520
376 800
27%
27%
27 410, 4
101 736
20,3%
16,9%
Index
Affluent
Active clients
135 000
Passive clients
≈ 87 000
Interested in private events Interested in investment
Noruma Research Institute. Marketing for Newly Wealthy Clients Marketing
2016
2017
1 010 000,00
1 020 100,00
1 030 301,00
Mass Affluent
5 050 000,00
5 100 500,00
5 151 505,00
5,00%
10,00%
15,00%
623,57
1 212,92
1 770,89
2 240,52
4 380,98
6 431,31
New Mass Affluent Clients**
Death/Divorce Rates 2011
2012
2013
2014
2015
2016
2017
Death Rate
13,50
13,30
13,20
13,10
13,00
12,90
12,80
Divorce Rate
4,50
4,50
4,60
4,70
4,80
4,91
5,01
*Percent of Law Agencies, with which bank has established relationships **Assuming, 70% of Law Agencies' clients become bank's clients
Russian Federation Federal State Statistics Service
30,9%
Affluent Law Agency Net Coverage* New Affluent Clients**
Channels for Suddens
40 167, 9
Total growth
Seattle Business Washington's Affluent are Happy and Spending Again Market Wired Researches
70 470
Law Agencies 2015
Channels for (Mass) Affluent
Rambler Finance «Богатые тоже платят» (2014) Российская газета «Смена банка владельцами зарплатных карт»
Appendix. Slide «Results». Costs.
Business Ducks
Strategy aspects
Cost
Comment
“Business Life” Package “Smart investor” Package “Sudden” Package
0
Depends only on Bank
“People like YOU“
50K
App Optimization cost. Big Data already exists – so, Is free
Deposits optimization
0
Depends only on Bank
Personal Advisory Online Tool
50K
App Optimization cost. Big Data already exists – so, Is free
Personal Manager
60K*450
Managers Salary * 450 managers
Cross Border Banking
?
Depends on partnership
Bank as investor
60K per month
Cost of column in journal or time in investment TV programmed. If online website – only salary of journalist and of advisor
Book of Marvels
3000\event
Price of one event * N of events
Law Agencies Support
?
Depends on partnership
Assets Management Seminars
10К\seminar * 12 = 120K
Cost of professional per seminar * N seminars a year
P.O.S optimization
0
Depends on partnership
Salary Cards optimization
0
Depends only on Bank
Online marketing
0
Big Data and Online Marketing campaign already exist. Only cost of integration.
Appendix. Slide «Results». Income.
Business Ducks
Main Calculations Growth in clients
Main Results Operational Income per month: 7 017 M
Salary Projects
30% of clients
Current Operational Income from Affluent: 2 834,9 M per month
POS + Mortgage
20% of clients
Operational Income 2017 from Affluent: 4 115 M per month
Other Channels
50% of clients
Parts of Active Clients is rising from 51% to 61% according to new
Other Channels
strategy, so Total Active Affluent income is 4 921 M per month Total Operational Income 2017: 9 120 M per month
Bank as Investor + Book of Marvels Affluent
33 788 (as they can be the same from both channels)
Current Affluent/Mass Affluent percentage: 40%
Bank as Investor Mass Affluent
101 736
Total percentage in 2017 according to new strategy: 54% (54, 1%)
Law Agencies Affluent
3 559
Law Agencies. Mass Affluent
12 810
Total Affluent
37 347
Total Mass Affluent
12 810
Total Sum Total Affluent
74 694
Total Mass Affluent
230 000
Total Affluent Income
727 M Rub per month
Total Mass Affluent Income
553 M Rub per Month