Growth of online and mobile in us banking industry by Sutherland Global Services

Online and Mobile Banking December, 2011

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©©2011 GlobalServices Services Inc., rights reserved. Privileged and confidential information of Sutherland Global 2010Sutherland Sutherland Global Inc., All All rights reserved. Privileged and confidential information of Sutherland Global Services Inc. Services Inc.

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Banks are likely to enhance the adoption of STP, channelagnostic content and processing capabilities in next five years Expected Changes in IT Platform and Infrastructure •

Straight-Thru Processing (STP) Credit Risk Management

Analytics

Core Banking Systems

Segment ation

Offer Manage ment

Customer Data Mart

XML Web 2.0 Tools

Contact Management

•

Straight-through-Process (STP) automates the assessment of risk for low to medium involvement products such as credit cards, personal loans – STP will enable banks to offer instant approval, at least, for existing customer in near term for these products – STP will be supported by credit risk management with automated risk assessment platform As ATMs, voice, data, branch, internet and mobile are moving to IP-based operating systems, service-oriented-architecture will become the backbone of the banking business – Banks will migrate business process to application server technology or even to the Cloud to reduce the operating costs

Avatars Voice Recogni tion Contact Manage ment

Contact Centre

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Customer dashboard enabled with analytics will help banks to serve their customer better Customer Dashboard • Banks are increasingly using customer data analytics to up-sell and cross-sell products • Banks will adopt customer dashboards to aggregate all credit and services related information • The dashboards can be accessed by branch, call centres and by relationship managers • This will help banks in improving customer experience at branch • For instance, if a customer wants to open a new account, the bank will not give him a blank form to fill. Instead, the system will generate a form that will have all details and the customer will only be required to sign it after including additional details if any • The dashboard will be updated on a real-time basis • In fact, banks may use RFID enabled ATM Cards or app phones to service their customer better • When a customer walks in the branch, the branch dashboard will be ready with the customer profile and possible offers for cross-sell/up-sell before he even approaches the counter

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Standardized XML-technology and Web 2.0 will be used to interact with customers and other stakeholders by banks Contents will be delivered through Web 2.0 or XML-based technology across multiple channels to enhance customer experience

Social Networking in Retail Banking

• Banks will integrate social networks with its websites and empower customers to rate and share their views on its products – Customers have already started sharing their views on bank’s products through Facebook, twitter, YouTube, community or product portals, whether banks like it or not – In such environment, banks have to embrace the media before it becomes too late

• Today, app phones have become ubiquitous, yet it is not been utilized by all banks

Reaching banks with consumer technologies

• Currently banks don’t allow to be contacted through Skype or Instant Messaging, though technology being used by billions of people around the world – Banks are expected to adopt these consumers channel very soon in future

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Banking will enrich customer experience with further simplification of existing processes •

Talking Avatars

•

Voice Recognition Systems •

Customization of IVR

Contact Management Software

• •

Avatars are virtual characters with realistic facial expression that communicates customer in various application such as customer care and self-service apps These avatars guide bank customers visiting its website to the product or services required or assists in making payments, etc.

• •

Banks will increasingly install the voice recognition systems within their existing IVR systems Voice recognition capability help banks to understand the most dominant enquiries and to optimize around this channel

Banks will optimize IVR for each customer – Currently an IVR sounds to customer, as if he is going through bank’s organization chart (Press 1 for Retail Banking, Press 2 for Credit Cards and so on) – Going forward a bank can ask what its customer wants or the bank can present only those options which are regularly chosen by him in previous interactions or are applicable to the customer

Banks will adopt new contact management software that will enable its customer representatives to see if there any outstanding issues of customers for any products/ services across any channel The software will enable banks to monitor and proactively respond to these issues before customer gets annoyed or makes repeated calls

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Personalization is becoming the most important online banking feature

Online banking capabilities Ranked Important by U.S. and U.K. Banking Customers • Set up alerts for account and credit card balances • Analyze spending pattern to help the customer know how much money he spends and deposits, during a specific period • Establish an account to save for a specific goal that can be funded from an existing account or from accounts outside the customer's bank • Ability to compare bank products or services that match a consumer's personal requirements eg. Credit cards • To have current accounts, credit card interest rate and other services evaluated automatically and receive recommendations for switching to alternative products • Change the layout of a customer's main online banking page (after login) so that the customer can see favorite or frequently used transactions or actions • View accounts/balances for all family members who have accounts at the same bank, and to set alerts and limits on family member accounts

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Banks may also start focusing on video banking as customers have matured with the increasing technology usage Video Banking • Video banking is a term used for performing banking transactions or professional banking consultations via a remote video connection – In few years, customers will view almost all product agreements on screen and authorize opening of new accounts with a biometric confirmation or on-screen signature through touch screen capability • Video-based specialized advisors will be available for even people residing in rural areas where banks don’t have branch presence • Video banking can be made available in branch, ATMs or even in some nontraditional locations like office buildings, malls, etc.

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Content for all channels will be monitored by a single team to bring standardization and similar customer experience Bank 1.0 channel architecture to BANK 2.0 channel architecture App Phone

Kiosk

Mobile

Retail

App Phone

Trading

Call Centre

Settlements Treasury

IVR

Retail

Mobile

Brokerage

WWW

Kiosk

Brokerage

WWW

Trading

Call Centre

Settlements

IVR

Treasury

Mortgages

POS

Trade Finance

ATM Branch

Card Services

Mortgages

POS

Trade Finance

ATM Branch

Card Services

• Today multiple channels are connected to various banking systems on a case-by-case basis – These channels have independent technology bridges and interfaces – Currently content is purpose-built for one channel as and when required • Going forward, entire content for all channels will be monitored by a single department, say customer content management team – The team will be responsible for maintaining and giving similar experience on all these channels – Sales offers and other information will be disseminated on a real-time basis across all channels • In future, a bank’s performance will not only be measured by the experience it gives in branch but by the experience provided across all channels © 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

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There will be further streamlining/ restructuring of banking processes to remove the silo-based functioning

Retail Call Center IVRS Phone Banking

Corporate Internet

www Internet Banking

Comm Internet

Channel Management

ATM In-Bank Systems

Commercial Call Care

•

Content Management

Self-Service Banking

Cards Call Centre

•

Contact Centre

Retail Internet

• • • • • •

IP (www, i-Bank, mobile) ATM Kiosk Voice/Data Voice Recognition Other

Customer Analytics ServiceOriented Architecture

The separate channel management for corporate and retail banking customer will diminish – The focus will optimizing the business process by managing all the activities by one team that has requisite skills – For example, skills required for content management, search engine optimization, call centers, etc. will be similar for commercial and retail, and can be managed by same team. There would be no separate customer contact numbers for different customer/product segments In fact, there will be increasing focus on developing mechanism that seeks consistent and superior customer support across all channels

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New age retail banker will depend on behavioral analytics for precognitive selling •

Marketing department of retail bank will change to meet the demands of digital media – The marketing manager can not retrofit the tactics of traditional print and TV ads  Online banners are now being blocked by pop-up blockers  15- or 30-second ads are “skipped” • Interactive brand experience is the need of the hour in digital space – Banks will be required to develop strategies to target customers with offers only relevant to their needs – Retail banks will constantly optimize customer propositions through segmental analysis, behavioral analytics, just-in-time manufacturing products and permission-based marketing • Marketing team will be supported by neural networks through precognitive selling – These techniques will help marketing team to anticipate sale based on customers behavioral patterns and segmental data – For example, when a retail customer get salary hike, the bank will automatically upgrade his credit card with an extended credit limit – When a customers buys a travel ticket, bank will automatically provide travel insurance at an agreed rate • Customer will be offered bundled products that will be continuosly optimized

Marketing 1.0 Brand

Campaign

Integrated

• Above-theline • Broadcast • TVC • Outdoor • Print

• Below-theline • Print • Radio • Direct Mail • Promotion

• Internet, www • Viral • Database, eDM • SMS, Other

Customer Dynamics

Brand Marketing

Marketing 2.0 www.sutherlandglobal.com 6 June 2013

By 2013, majority of banks are expected to replace transaction-oriented online banking views with Personal Financial Management (PFM) interfaces Online Personal Financial Management Services • •

•

Most banks provide limited services under online personal financial management (like view account balances, set up payees, schedule and pay bills, and transfer funds) However as per a recent Gartner survey, consumers prefer holistic view of their financial status to help them analyze their expenditures more efficiently – Although banks offer calculators on their websites for loans and other bank products, they're typically disconnected from the customer's actual expenses, transactions and deposits, and requires the customer to enter all his data to generate a possible loan payment or interest rate schedule In contrast, a number of non-banking sites and applications provide a graphical view and analysis of the bank and other financial services, account status and other information to the customer – Some of the non-banking sites are Mint.com, Manilla, Money Dashboard, Pageonce, doxo, Bundle, HelloWallet and LearnVest – Other sites and applications provide similar PFM functionality and focus on budgeting, debt repayment, savings or expense management (for example, spendbrite, Payoff.com, SaveUp and SmartyPig)

Some leading banks’ PFM offerings

• BBVA Compass, Lloyds TSB, Wells Fargo, Royal Bank of Canada, BMO Financial Group and the PNC Financial Services Group have updated their online banking sites to include Personal Financial Management functionality • Citibank provides the customer a graphical summary view of accounts and transactions • PNC created the "virtual wallet" to give customers an aggregated, graphical view of their accounts online Gartner Survey, Dec 2011 © 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

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Banks have a large scope to improve their PFM interface and monetize it

Present PFM services •

Free PFM services

Mobile Delivery Model

PFM data that is available only to customers when they log on to their online banking accounts limits PFM's usefulness to customers

• •

•

Social Engagement

•

Addressing Customer Goals

As non-banking sites such as Mint.com offer PFM services for free, banks may not be able to charge for the personal information services

Suggestions for improved PFM services

•

The present PFM functionality focuses on delivering the customer's current and past transactions in an organized analysis Non bank sites like Mint.com enables users to view the investment goals to have an overall picture of their financial status

•

Presently banks do not provide social capabilities to the online PFM services However non-banking sites such as SmartyPig allow account holders to place widgets on Facebook pages to enable friends and family members to contribute to the customer's goal, or watch the customer achieve a goal

•

However the banks can monetize the PFM services by connecting PFM to the customer's spending, transaction and payment data and with bank's advice, products and services Also banks can provide less expensive automobile insurance or coupons for regularly purchased items Thus banks should provide PFM data and functionality to customers via applications on mobile devices and media tablets as well Banks must also consider which PFM data capabilities are useful to customers at the automated teller machine (ATM) or kiosk However there is no connection of past and current data to view his personal finance and financial goals Banks can link these goals to the advice for products and services that can help to achieve those goals

Banks can provide services such as retirement savings to the customers to compare the financial standings with other customers who have similar profiles (such as married with two children)

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PFM capability of Wells Fargo: My Spending Report

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PFM capability of Royal Bank of Canada: myFinanceTracker

Expense Analysis

• Customers’ expenses are automatically categorized in a pie chart so that he can quickly see where his money is being spent and get valuable insights about his spending pattern

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Mobile has become a must-have channel for all banks Importance of mobile channel is set to grow in the future

High

Product Complexity

Contactless Payments

Group Payments

Mobile Marketing Personal Payments

Mobile Banking

Transaction Alerts

Business Banking

Mobile Billpay

• Google and ISIS are conducting pilot test for NFC enabled mobile payments • Mobile wallets are increasingly becoming common

Low Low

Uniqueness of Customer Experience

High

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Still, most of the banks provide basic mobile banking features Mobile Support for Basic Mobile Retail Banking

Function

Description

Mobile Delivery

Account Information Services Account balance

Get and view balances for payment/demand deposit and savings accounts held with the bank. Set up and receive alerts regarding transactions, balances and bill payment.

SMS, downloadable apps for smartphones, mobile Web applications SMS, downloadable apps for smartphones (Alerts can also be sent to customers via email.)

Contact bank

Send an SMS message to bank customer service to "call meâ&#x20AC;?

Location search

Search for the location of bank branches or ATMs

Statements

View statements for accounts

Transaction history

View transactions performed on accounts

SMS, downloadable apps for smartphones, mobile Web applications SMS, downloadable apps for smartphones, mobile Web applications SMS, downloadable apps for smartphones, mobile Web applications SMS, downloadable apps for smartphones, mobile Web applications

Alerts

Transaction and Payments Fund transfers (me-to-me fund transfer) Bill payment

Transfer funds among customer accounts. This supports scheduled and SMS, downloadable apps for smartphones, mobile Web immediate transfers and transfers to other currencies applications View and pay bills, add a payee, and schedule bills (one time and automated)

SMS, downloadable apps for smartphones, mobile Web applications

Source: Gartner (August 2011)

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P2P payments and remote capture are increasingly becoming popular mobile functions now Mobile Support for Emerging Mobile Retailing Banking Functionality (1/3)

Function Account Information Services

Description

Card activation/ cancellation Reward management

Activate or cancel a credit or debit card.

Mobile-based registration

Customers can register for mobile banking using their mobile devices. This also supports multiple-channel registration â&#x20AC;&#x201D; that is, via the bank's website, branch, call center, interactive voice response (IVR) or ATM

Custom alerts

A bank can create its own custom alerts for customers

Review reward/loyalty points balances and reward options

Mobile Delivery Supported (via SMS, Downloadable Applications for Smartphones or Mobile Web Applications) SMS, downloadable apps for smartphones, mobile Web applications SMS, downloadable apps for smartphones, mobile Web applications SMS, downloadable apps for smartphones, mobile Web applications SMS, mobile Web applications, downloadable apps for smartphones

Transaction Services P2P payments

Top-ups Remote capture

Transfer funds from a customer's bank account to another consumer's bank account. This can be done for domestic and international P2P payments (also known as international remittances). Some banks may integrate other payment services, such as Western Union or Moneygram, and self-service devices, such as ATMs and kiosks, into the P2P payment process. Top up the consumer's mobile accounts using funds from his or her bank account This capability enables the bank to use the camera on a mobile phone with an application to perform a transaction that includes the transmission of document based information.

SMS, downloadable apps for smartphones, mobile Web applications

SMS, downloadable apps for smartphones Downloadable apps for smartphones

Source: Gartner (August 2011)

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Role-based mobile functionality is fast emerging among other transaction services

Function Transaction Services

Description

Mobile Delivery

P2P payments

SMS, downloadable apps for smartphones, mobile Web applications

Top-ups

Top up the consumer's mobile accounts using funds from his or her bank Account This capability enables the bank to use the camera on a mobile phone with an application to perform a transaction that includes the transmission of document based information. Consumers who already have one account with the bank can open another using a mobile device. This will be extended first to customers and then to new customers. The process may require security, authentication and validation through other channels to comply with all "know your customer" and authentication requirements Initiating loan repayment from the mobile device

SMS, downloadable apps for smartphones

Remote capture

New account opening

Loan repayment

Downloadable apps for smartphones

SMS, downloadable apps for smartphones, mobile Web applications

Role-based delivery

Enables a bank to deliver mobile-based functionality to specific targeted niche SMS, mobile Web applications, downloadable apps for groups of customers or to support role-based access to functionality. Banks smartphones can manage customer access and generate reports on mobile-based usage

Mobile advertising integration

Integrate bank transactions with mobile advertising. A consumer can interact with an ad on his or her mobile device, connect to a transaction or new product/service and buy that product or service, or perform a transaction

SMS, downloadable apps for smartphones, mobile Web applications

Source: Gartner (August 2011)

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With increasing mobile adoption, security services have also become important

Function

Description

Mobile Delivery

Supports the use of a mobile device to receive a onetime PIN to log on to or provide customer verification at the bank's website to access online banking functions or other channels

SMS, downloadable apps for smartphones, mobile Web applications

Security Services Security support

Source: Gartner (August 2011)

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Mobile Banking Functionality Roadmap for US: 2011 - 2012 Q3 2011

Q4 2011

Q1 2012

Q2 2012

Q3 2012

Q4 2012

One-way alerts Text banking Picture bill payment

P2P payments Remote deposit Two way SMS/Actionable alerts Other services: PFM, inter-FI transfers, expedited payments, small business, contactless payments

Base: 15 Mobile Strategists at large US banks and credit unions 2010, 10 in 2011 Source: “Mobile Banking and Payments Study,” Forrester custom research prepared for Fiserv, September 2010 and 2011

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Mobile Banking Functionality Roadmap for US: 2011 - 2012 Q3 2011

Q4 2011

Q1 2012

Q2 2012

Q3 2012

Q4 2012

Mobile Web iPhone Android

iPad Other: Android tablets, Windows 7

Base: 15 Mobile Strategists at large US banks and credit unions in 2010, 10 in 2011 Source: “Mobile Banking and Payments Study,” Forrester custom research prepared for Fiserv, September 2010 and 2011

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Importance of automated channels will grow, as they start generating higher revenues for retail banks The chart below represents the timeline of disruptive changes, along with the required organizational responses The Internet phenomenon becomes the first disruptive technology to impact banks

1995

The launch of app phone, 3G and WiFi represents the second disruptive technology for banks

2003

Internet banking transactions exceed branch transactions in most developed economies for the first time

2007

Marketing spend on digital media in financial services exceeds traditional media for the first time

App phone sales dominate the mobile landscape, most are RFID/NFC enabled

2010

Internet banking revenues exceed branchled revenues in the US and UK markets for the first time

2011

2012

2014

Contactless credit cards become the dominant POS/card combination

â&#x20AC;˘ It is expected that automated channels will account for 70% of bank revenue in the next five years â&#x20AC;˘ Channel management and customer dynamics will become increasing important strategic team for retail banks in future ÂŠ 2011 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

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Going forward banks will have to develop robust mobile support for Mobile Financial Services Functionality (1/2) Functionality

Description

Administration

The ability to manage customers who use mobile banking, including customer registrations and lost phones. The administration functionality also collects data to provide feedback on usage metrics for the applications across the banking organization. This capability may also integrate with customer care systems from the banks to enable bank staff to monitor customer service-level agreements

Application development Platform

Create new applications that are deployed to mobile devices. Deliver any existing banking service to any (appropriate) mobile device. The platform should enable banks to manage applications deployed to any device, using any application deployment Method

Bank multichannel Integration

Leverage other applications and multichannel integration technologies while reducing the creation or perpetuation of silo applications and Technologies

Device â&#x20AC;&#x201C; independent

Allows the bank to deploy mobile retail banking functionality to any current or future mobile device. This enables the bank to avoid the creation of mobile application silos

Mobile-application-independent Allows the bank to deploy mobile retail banking functionality in the delivery mode appropriate to the targeted customer niche: SMS, mobile Web and downloadable. This capability also enables the bank to avoid mobile application silos Mobile support for other bank Channels

Enables the bank to develop applications that enable the customer to use a mobile device in support of activities being performed at other customer touchpoints or channels

Reuse and extensibility

The ability of the bank to extend and reuse functionality, applications, services and tools to the rest of the bank. This allows the bank to coordinate and manage its mobile banking initiatives across the bank. This capability is increasingly important as banks seek to deploy mobile self-service to business customers

Payments

Support for a variety of mobile consumer payment technologies; includes integration with bank payment hubs and related internal bank payment processing systems

Source: Gartner (August 2011)

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Going forward banks will have to develop robust mobile support for Mobile Financial Services Functionality (2/2) Functionality

Description

Channel management services

Services that enable the bank to manage customers who use mobile-based banking and payments services. This includes retail and commercial bank customers. Capabilities include the ability to enable application and user security, administer users and report on usage.

Business processes and functionality

Includes banking and payment functionalities (transactions, information delivery and account services), alerts and security for all aspects of mobile banking, payment transaction, or other banking or payment activity using the mobile device.

Device Support

The ability to deliver a business process and channel management services with the appropriate user interface for the specific mobile device.

Interface Adaptors

These enable the platform to integrate with the bank's own multichannel integration architecture, to connect to internal bank systems, including CRM, core banking and payments systems, and to integrate with systems and partners external to the bank.

Security

Support for a variety of methods to ensure application and transaction security. The bank can choose appropriate security methods and technologies based on the requirements of a specific target market, transaction or application. It also supports the bank's existing security arrangement, mobilebased transaction authorization for other channels (e.g., SMS alerts for one-time passwords), as well as multiparty authorization for high risk transactions.

Source: Gartner (August 2011)

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