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Challenges for the future of retail banking2015
I would like to end with an
amusing interview of the
comedian Louis C.K. to show
just how demanding
consumers are and what it
takes to keep them satisfied.
Desktop Research
Challenges for the future
of Retail Banking
2015 Challenges for the Future of Retail Banking
Slide with vertical Background.
A change of rules
b
As of today, underlying conditions for the banking 

business have changed profoundly and irreversibly:


• Intrinsic transaction cost approaches zero as
clerical work has become automated and computing/
telecommunication costs keep on dropping.
• Access to digital services has become pervasive
thanks to mobile devices.
• Distributed computing technologies have enabled
business ecosystems and peer-to-peer architectures.
• Pervasive data processing has created a flood of
customer data.
• An increase in choice has tilted the balance of power
in favor of customers.


Under this new set of conditions, a new scenario 

is unfolding. Changes can only grow.
Current trends
Challenges for the future of retail banking2015
Changes in three
interdependent
areas
b
Rapid changes are taking
place in three dimensions or
points of view on the banking
business that are strongly
interdependent. Most of new
developments affect the three
of these dimensions.
Customers adopt those enabling
technologies that cater to their fundamental
needs and let them change their expectations
towards what they can do with their money.
New customer 

expectations
Businesses leverage enabling
technologies and use them to
cater to customers, often
engaging in business practices
that were not the norm in the
banking industry before.
New strategic

trendsEmerging technologies
give rise to new ways of
conducting financial
activity.
New enabling
technologies
2015 Challenges for the future of retail banking
New enabling technologies
These are some of the
fundamental technology
developments that are changing
our idea of what banks can do.
Our busiest branch in 2014 is
the 7:01 from Reading to
Paddington - over 167,000 of
our customers use our Mobile
Banking app between 7am and
8am on their commute to work
every day.

Ross McEwan,

CEO,
Royal Bank of Scotland
Challenges for the future of retail banking2015
Extracting

value from

data
Get data, make sense of it, and use
it to give added value to either
customers or third parties.
New enabling technologies
To show customers

the big picture

PFM tools, of which Mint is
probably the most popular,
can aggregate information
from several accounts and
use graphics to provide
customers with actionable
information on their budgets
and spending. Fintech
solutions such as Simple,
Moven or mBank have
incorporated PFM into their
offering.
To empower
customers

Simple applies
transaction geolocation
and identification of
constant expenses to
give the user a high
control over their use of
money.
To open new 

revenue sources 

Cardlytics exploits card
transaction data to
enable banks to send
relevant promotions to
their clients.
Challenges for the future of retail banking2015
Digital

service

interoperability
Link and be linked, embed and be
embedded, invoke asynchronously
and be invoked asynchronously.
Enable and leverage the building
blocks of ecosystemic businesses, at
the front-end as well as the back-end
level.
New enabling technologies
To let customers give
their money meaning

Moven allows
consumers to use
desired goods from their
Pinterest wishlists as
savings goals.
To enable

third-party services

The Open Bank Project
is an open source API
and app store for banks
that empowers financial
institutions to securely
and rapidly enhance their
digital offerings using an
ecosystem of third-party
applications and
services.
To support

open innovation

BBVA hosts annual
innovation challenges
where it opens its API to
developers and allows
them to develop new
apps and services based
on the bank’s information.
This is a way for the bank
to connect with startups
and the community.
Challenges for the future of retail banking2015
Mobile

First
Gone are the days when mobile
interfaces were a “gracefully
degraded” version of desktop
applications. Mobile is now thought of
as the preferred channel, and from
there the rest of channels are worked
out by progressive enhancement.
New enabling technologies
To keep up with the
new generations

Global research
conducted by Gemalto
reveals the strong level of
engagement millennials
have with their mobile in
relation to financial
services.
To be where 

customers are

GoBank, Instabank,
Moven, Simple, or Fidor
are examples of mobile
banks launched in recent
years, offering mobile
account opening,
checking accounts,
savings, and credit and
debit cards, as well as
advanced PFM tools and
mobile payment
solutions.
To get to the 

base of the pyramid

M-pesa is the world’s
leading peer-to-peer
payment solution. It
provides the
underbanked /
unbanked in developing
countries with instant
and convenient money
transfers and payments.
Mobile phones provide
service access and user
identity authentication via
SIM services.
Challenges for the future of retail banking2015
Making everything
an order of
magnitude faster
Simplify processes, automate
clerical work, leverage straight-
through processing, proactive data
analysis, and everything at your
disposal to shorten waits from days
to hours, from hours to minutes,
from minutes to seconds.
New enabling technologies
To match the mobile
context of use

mBank simplifies mobile
login to a 5-8 digit pin,
shows the account’s
balance in the pre-login
screen, and enables 30-
second loans.
To capture data 

at the right time

As soon as the customer
makes a transaction with
the associated debit
card, Moven sends a
real-time notification
allowing to categorize
the expense and
providing instant
feedback of budget
status.
To exceed what the
current system allows

The Citizens Bank of
Weir, Kansas,
circumvents the national
ACH fund transfer
system, which involves
next-day waits, and uses
debit cards to enable
real-time money
transfers.
Challenges for the future of retail banking2015
Higher

level

interactions
Go beyond just enabling
transactions or providing financial
statements, and instead, occupy
more stages of the customers’
financial journey. Enrich transactions
with other real-world data, present
them in ways that make sense for
decision-making, support
establishing goals and breaking
them down to behaviours and
actions, and even help establishing
and maintaining habits.
New enabling technologies
To be there in planning
and decision making

mBank goes beyond the
classic “table of numbers”
statement format and
provides graphical
representations of
statements and offered
products. They also use
gamification tactics to
foster desired behaviours.
Timely and relevant
commercial suggestions
are interspersed within
statement data.
To address
unattended needs

Even is a service for
people who work by the
hour, helping them even
out their liquidity in a
context of irregular
earnings.
To make marketing 

more effective
Using predictive
analytics, Personetics
creates a personalized
list of actionable insights,
supported by step-by-
step guides to help users
in real time.
Challenges for the future of retail banking2015
Allow commitments
and transactions
over social networks
Socially enabled spaces can provide services
for identity authentication, individual and group
communications, social object sharing, and
reputation. These spaces can provide
authenticated communications, commitment
record, and transparency/accountability
mechanisms over which mutual commitments
and financial transactions can be conducted
with an adequate risk control. Emerging
products such as instant peer-to-peer
payments, P2P loans, crowdfunding platforms,
and sharing economy businesses are some of
the applications.
New enabling technologies
To lend without having
the money

The top five P2P lending
platforms issued more
than 1M loans between
them, generating over
$10Bn a year. Lending
Club alone issued over
$3Bn in 2014 and was
recently listed on the
NYSE.
To let fans support
their favourite projects
Crowdfunding platforms
such as Kickstarter
provide a way to raise
money for new projects
via a system of pledges
and rewards.
To let money enter 

the conversation

In November 2014
Snapchat, the
ephemeral messaging
app for millenials,
released Snapcash, a
service for P2P
payments. Secure
payments are provided
by Square Cash’s e-mail
payment system.
New customer expectations
Customers are 

beginning to demand more 

of those who handle their money,
whether it’s banks or not.
2015 Challenges for the future of retail banking
Silicon Valley is good 

at getting rid of pain points.
Banks are good 

at creating them.

Jamie Dimon, 

CEO and chairman, 

JP Morgan Chase
Challenges for the future of retail banking2015
Right 

here,

right now
People have learnt they can invoke
services in the very place and
moment when the need arises, and
demand instant delivery whenever
possible. Also, if a company is going
to contact them proactively, they
want this to happen right in the
place, moment and context in which
they find the message relevant and
can immediately act on the call to
action.
New customer expectations
To enroll 

without hassle

BankMobile allows
customers to snap a
photo of their driving
license or ID document
to enroll them into the
bank. Customers can
also take a photo of a bill
to pay for it.
To buy it 

as you see it

In June 2015, Pinterest
launched Buyable Pins,
with which Pinterest
users can initiate an e-
commerce transaction
straight from their
favourite place of
product discovery.
To spend

without worry

Moven’s Emergency
Cash uses GPS and
behavioural insight to
detect that the customer
is entering a place where
expenses are made
regularly. If the
forecasted expense
exceeds available
balance, the app offers
an instant loan to prevent
overdraft.
Challenges for the future of retail banking2015
It’s what

the money

does
Financial professionals tend to think
about money and financial
operations as something abstract
and independent from physical
reality. But people find it very relevant
what they want to do with their
money. Also, many people find it
important to know what banks do
with their money and where they get
the money from.
New customer expectations
To be an owner 

and not just a fan

Loyal3 lowers entry
barriers to trading by
enabling customers to
“shop” for stocks based
on the bands they love,
and invest only $10 at a
time.
To know and share
what the money’s for

Smartypig, BBVA
Compass’ goal saving
tool, allows customers to
set specific goals for their
savings, accept
donations from their
Facebook friends, and
even offers deals with
specific retailers for
additional discounts.
To be proud of what
your money is doing

Triodos Bank’s balance
sheet grew 8% in the
first half of 2015,
showing some
customers want to have
the guarantee that their
money goes to support
sustainable and ethical
initiatives, rather than
having the maximum
rentability no matter
what.
Challenges for the future of retail banking2015
Get to
know

my world
People prefer to work with words
and concepts that are relevant to
their everyday world rather than the
financial world. A financial concept
will be better apprehended if it's
translated into terms that are familiar
to the customer.
New customer expectations
To make decisions in
a more familiar place

mBank sells its products
in a space that reminds
more of an e-commerce
store than a financial
product catalog.
To make it simpler to
manage your money

Simple informs the
customer of something
much more useful of
their account balance:
their “Safe-to-spend”, or
the money surplus in
excess of the
foreseeable upcoming
regular payments.
To connect with new
generations

OCBC designed their
new millenial-targeted
bank “Frank” after
conducting extensive
ethnographic studies on
the preferences and
habits of young
Singaporeans.
Challenges for the future of retail banking2015
Peers as

alternate

authority
When enabled by connections,
transparent information and
accountability mechanisms, people
can provide each other trust (and
trust-based transactions) in lieu of a
central authority.
New customer expectations
To decrease 

lending risk
Before registering with
the SEC, Lending Club
enabled investors to look
for borrowers with similar
interests, on the
hypothesis that this
decreases likeliness of
default.
To delegate
investment decisions

eToro allows people to
broadcast their trading.
People can duplicate the
trading decisions of the
most successful traders.
Popular investors get
compensated.
To evaluate a project’s
potential

One of the universal
characteristics of
crowdfunding platforms
is transparency of the
fundraising progress,
which activates the effect
of “social proof”. As the
raised funds reach a
significant portion of the
intended goal, people
begin to believe the
project can be a
success, and then they
jump in.
Challenges for the future of retail banking2015
Involve me

only for 

the important
People hate having to do menial
tasks and having their attention
hijacked with things that are
irrelevant to the present moment.
They want to be as less involved as
possible in the tactical execution of
their decisions. They want to be
there to decide things that matter to
them, but from then on, they want
things to go as seamlessly as
possible.
New customer expectations
To automate low-level
portfolio management
decisions

Betterment is a robo-
advisor (a system that
automates portfolio
management via Modern
Portfolio Theory). It has
93,000 customers,
managing over $2.2Bn in
client assets. No
minimum investment is
required and
management fees are
extremely low relative to
traditional investment
advisors.
To make the most 

of card perks

Walla.by is an app that
helps users choose
which card to use for
payments and provides
recommendations on
how to pay based on
relevant loyalty schemes,
discounts, credit
balance, etc.
To save 

effortlessly

Digit learns from your
spending habits and sets
small amounts aside for
you to save without
noticing.
Challenges for the future of retail banking2015
Behavioural

fitness
Sometimes people want to be
provided motivators, facilitators and
triggers to help them engage in
habits that will help them reach their
goals.
New customer expectations
To make the most of
financial products

mBank awards their
customers badges to
reward exploring the
products’ features.
To save more

for retirement

Putnam Investments, one
of the largest
administrators of 401(k)
plans in the US, allows
users to compare their
savings against other
customers similar in age
and income, and simulates
the impact of keeping up
with the best in their
retirement. This nudges
people into saving more.
To avoid debt and
overdrafts

Thinkmoney helps
customers keep their
finances under control by
setting aside the money
they need to pay regular
expenses such as bills.
Only the remaining
money can be used from
the associated debit
card.
New strategic trends
New entrants, new technologies,
and new forms or relationship
with customers are altering 

our idea of how banking is done.
2015 Challenges for the future of retail banking
If you think about the big guys
now, it is not the banks, it is
these four large tech
companies that are worth more
than us. They have more cash.
They have less regulation.

Ana Patricia Botín 

Chairperson, 

Santander Group
Challenges for the future of retail banking2015
Progressive 

inclusion
As intrinsic transaction costs
approach zero and self-service
through digital channels becomes
the dominant service modality,
services that only were available to
people in developed countries are
now being offered to the
underbanked in developing
countries, while in the Western
world, services that only a high worth
minority used are being made more
easily available to the general public.
New strategic trends
To lower entry barriers
to investment

Loyal3 allows its users to
buy fractions of shares
for as less as $10, and
charges no fees. It’s the
stock-listed companies
who pay Loyal3 for the
transaction costs plus a
fee. In this way, they are
bringing investment to
non-investors.
To allow you and me
to invest like the rich

iBillionaire mines public
records in the Securities
and Exchange
Commission to find out
the investing strategies of
very high-worth
individuals, and allows
people to duplicate them
via a specific ETF.
To evaluate credit risk

of the underbanked

First Access provides to the
unbanked and the
undocumented alternate
methods of risk scoring,
based on location, strength
of social network inferred
from mobile usage, and
other sources. This gives
them access to loans that
would otherwise bear
unattainable borrowing
costs.
Challenges for the future of retail banking2015
Unbundling
A high number of new entrants in the
competitive space of banks are not
trying to present alternatives to banks´
comprehensive product portfolios.
Instead, they are targeting one single
point of relevance for customers (with
one or two underlying financial products
that are sometimes provided by banks)
and focus on solving it better than
banks. Today, it’s possible to have your
financial life covered through a bunch of
these single-purpose solutions instead
of dealing directly with a bank.
New strategic trends
To pay 

Mobile payment
solutions have so far
been struggling to
replace cards at the
point of sale, but new
initiatives like Apple Pay
seem to be polished
enough to become an
alternative to cards and
push banks and card
issuers out of the paying
touchpoint.
To save

While motivated and/or
social saving tools like
Smartypig or Coinc allow
you to save for a specific
goal, electronic money
pools like eMoneyPool or
Nickle join the
effectiveness and social
bonding of ROSCAs with
the convenience of
online channels,
surpassing banks’
savings accounts in
some aspects.
To borrow

According to a University of
Edinburgh survey among
200 credit analysts from
around the world, 75% of
them believe that P2P
lending is a threat to banks.
Alternative financial services
and consumer finance
companies place borrowing
outside of bank branches.
Some of them are backed
by banks, and some of
them are not.
Challenges for the future of retail banking2015
Aggregation
Although most banks strive to be
people’s one-stop shop for financial
services, reality is most people have their
financial life scattered through a number
of different banks and other financial
institutions. Aggregation solutions scrap
data from multiple sources and integrate
it to allow people to have a single place
from which to monitor and control their
financial life. This can deprive banks from
the opportunity to be present in the
moments of truth when people analyze
and plan their finances.
New strategic trends
To better manage 

your personal finance

Solutions like Mint from
Intuit can integrate data
from a variety of banks.
Simple and Moven do
that also, but throw in
being able to do
transactions, positioning
themselves as an
alternative to banks.
To join all your assets,
monetary or not

Fidor aggregates all user
assets that represent
purchasing power,
including not only bank
accounts, but airline
miles, precious metals,
cryptocurrencies, and
potentially in-game
currencies.
With growing 

institutional support

Until today, aggregation
efforts rely largely on scraping
data from reluctant banks.
Organizations such as the
Financial Data and
Technology Association in the
UK have been working with
governments and regulatory
authorities to make data
availability compulsory. As a
result, in October 2015, the
European Parliament has
included this obligation in the
revised Directive on Payment
Services.
Challenges for the future of retail banking2015
Some unbundled banking services are
being repackaged as value-added
components of a non-financial
service’s value proposition. The
ultimate provider of the financial service
may have a banking license, but
consumers don’t have the perception
that they have been working with a
bank. Although this is not a new
phenomenon, current enabling
technologies are making it more
common. This may become for banks
a new source of brand erosion.
New strategic trends
To pay for dinner

The Opentable service
started offering
restaurant reservation.
Now it also allows users
to pay for their meals
easily, doubling as a
payment medium.
To get a home
The British real estate
service Zoopla helps users
find a new house and
calculate its valuation. It
includes comparators for
services such as
mortgages, insurance and
utilities. Hoopla also enables
banks such as Barclays to
offer real estate searching
services under a “powered
by” agreement. This is a
mixed example of
aggregation plus this
rebundling trend.
Rebundling into 

non-financial
services
To shop on credit

Spain-based Carrefour
Servicios Financieros is a
regulated financial institution
that offers debit/credit cards
and loans. It’s co-owned by
the French retail company
Carrefour and Cetelem, a
bank specialized in credit.
However, customers
perceive it as an extension
of the retail chain’s value
proposition.
Some open challenges
Some bankers and analysts think that
Google, Facebook, Amazon or the like will not
fully enter a highly regulated, low-margin
business such as banking. I disagree. What is
more, I think banks that are not prepared for
such new competitors face certain death.


Francisco González, CEO,BBVA
Challenges for the future of retail banking2015
Open questions
for a new
scenery
The changes described
above create a new set of
conditions for banking, where
some rules of business are
not clear yet. Each player
must look for answers that
work for their customers, their
strategy, and their assets and
skills.
How to tell apart fintech revolutions 

from fintech flops?

How will banks retain and develop 

customer significance?

What will be the role 

of branches in the future?
?
?
?
Challenges for the future of retail banking2015
Reports of banks’ death may have been
greatly exaggerated. Some years have
passed since the first analysts started to
forecast significant erosion of banks’
business at the hands of fintech, and yet
the most brilliant performers have so far
failed to seriously threaten incumbents.
Still, fundamental changes seem to be
underway. Other disrupted industries, from
travel to media, teach us that before every
exponential growth there is a period where
multiple challengers stagnate or die. Until
someone gets it right.
Some open challenges
How to tell apart
fintech revolutions
from fintech flops?
Challenges for the future of retail banking2015
Studies about millenials’ growing indifference to
banks have contradictory results. While the often
quoted Millenial Disruption Index seems to predict
that banks may not be the next generation’s
preferred choice for financial services, two
qualitative studies from Designit in two different
countries seem to indicate that when their first
payroll arrives, explicitly disdainful millennials still
will flock to their parents’ banks in search of a
stable point of reference. And yet, the value
proposition of “all your financial services, in one
place, for life” seems to be losing strength in favor
of more specific, contextually relevant alternatives.
Some open challenges
How will banks retain
and develop customer
significance?
Challenges for the future of retail banking2015
Now that the rhythm of branch closures in
Europe and the USA seems to be decelerating
as new concentrated banks right-size their
commercial networks, and in a context where
branch visit frequency has dropped to once to
twice a year, there is an consensus that
customers still want branches for reassurance
and advice. Then again, this consensus is
among banks who do have branches. The
success of direct banks in growing their
customer bases tells otherwise. Meanwhile,
different new models arise of what branches
can or should be for customers.
Some open challenges
What will be the role
of branches in the
future?
Future scenarios
Scale and trust are the most
significant differentiators
between the types of
organizations. Incumbents have
it and protect it. FinTech
disruptors have to hustle and
differentiate to achieve either.
Both are critical.
Bradley Leimer, 

Head of Innovation, 

Santander Bank, N.A
The world has started to dramatically
change and banks are fighting to ‘protect’
their established business, to turn the oil
tanker, to find new relevance and a new fit.
Start-ups are natives of this new world, 

and are fighting to achieve scale.
Can legacy banks find the speed, agility and
new business model faster than FinTech
can find scale? Legacy infrastructure,
entrenched culture, and a disengaged
workforce make that very difficult.
Jason Bates,
Co-founder,
Mondo Bank
Challenges for the future of retail banking2015
Two key
uncertainties
As an inspiration for a classic
scenario planning exercise,
we have selected two of the
many uncertainties of the
current situation.
Option A Option B
Will larger banks maintain
their dominant position?
Large Banks Stay

Yes, larger banks will largely
domain the market.
Large Banks Fail

No, new entrants will
eventually become the new
dominant players.
Will the portfolio of
banking products as we
know it remain the
preferred financial
product bundle?
Banking Portfolios

Yes, people will keep on
choosing financial services
from banks’ product
catalogs.
Contextual Services

No, financial services will be
unbundled and then
rebundled under more
contextually relevant criteria.
Challenges for the future of retail banking2015
Larger banks invest in omnichannel front-offices,
and modernize their core systems to keep with
the evolving demands of customers, while
learning to leverage their physical presence and
trusted brands. Most of fintech companies end
up either failing or being acquired by larger
banks. Some independent fintechs remain,
working at niches that expand the market rather
than eroding it from banks.
Some new, native digital banks enter the scene
and make the market more interesting, but never
steal significant market share before incumbents
successfully copy their good practices.
Future scenarios
Large Banks Stay + Banking Portfolios =
Digital Business 

as Usual
Banking Portfolios Contextual Services
Digital Business 

as Usual
Banks Find People 

where They Are
Digital Neo-Banks 

Take Over
Banks Get Pushed
Down to Wholesale

LargeBanksStayLargeBanksFail
Challenges for the future of retail banking2015
Waning branch visit frequency, and rebundling of
financial services under non-financial services,
deprive banks from traditional discovery
touchpoints. Banks react by building a presence in
the places and moments where the need for
financial services arises, providing contextual
services at points of relevance. Maybe even
traditional banks’ brands become low-visibility
umbrellas presiding complex brand architectures
of rebundled services à la Procter & Gamble. All in
all, the activity we today know as banking changes
greatly, but it’s still made by the same companies.
Future scenarios
Large Banks Stay + Contextual Services =
Banks Find People
where they Are
Banking Portfolios Contextual Services
Digital Business as
Usual
Banks Find People 

where They Are
Digital Neo-Banks 

Take Over
Banks Get Pushed
Down to Wholesale

LargeBanksStayLargeBanksFail
Challenges for the future of retail banking2015
A new cohort of native digital banks
captures the majority of market share.
Banking remains largely as we know it, but
without the drag of inadequate cultures,
friction-high legacy technologies, and
increasingly unprofitable branch networks,
these new entrants overtake previous
incumbents by making it faster, cheaper
and better, their exponential growth
probably funded by deep-pocketed
technology giants rather than old-money
financial lords of yesteryear.
Future scenarios
Large Banks Fail + Banking Portfolios =
Digital Neo-banks
Take Over
Banking Portfolios Contextual Services
Digital Business as
Usual
Banks Find People 

where They Are
Digital Neo-Banks 

Take Over
Banks Get Pushed
Down to Wholesale

LargeBanksStayLargeBanksFail
Challenges for the future of retail banking2015
Underlying financial products remain as
always (deposits will be deposits, loans will
be loans), but as highly efficient, low-
margin commodities below the customers’
line of visibility. People don’t buy financial
services to banks anymore, but to a set of
new actors that master everyday context
and significance and get to keep
customers’ loyalty and margins, while
banks work for them, constrained under
ever-tightening compliance rules, in a
heavily reintermediated landscape.
Future scenarios
Large Banks Fail + Contextual Services =
Banks Get Pushed
Down to Wholesale
Banking Portfolios Contextual Services
Digital Business as
Usual
Banks Find People 

where They Are
Digital Neo-Banks 

Take Over
Banks Get Pushed
Down to Wholesale

LargeBanksStayLargeBanksFail
How to be ready
We always overestimate the
change that will occur in the
next two years and
underestimate the change that
will occur in the next ten. Don't
let yourself be lulled into
inaction.


Bill Gates
Challenges for the future of retail banking2015
Some things

are certain
The future might be uncertain,
but there are some actions
that are clearly and urgently
needed.
Last call

for customer-centeredness

Open silos,

then break them

Reach out and touch

para-financial contexts

Tackle challenges with

split front/back strategies
!
!
!
!
Challenges for the future of retail banking2015
The recent efforts from banks to become customer-
centered are clearly insufficient. We say customers we give
them expert advice but we give them hard-selling. We say
we need to educate them about our products, but we
haven’t educated ourselves enough about their needs and
habits, and sometimes even about our own products. 

We say we are all about people, but when they have a
problem we won’t move a finger to go beyond what the
teleprocessing system allows. Customers have alternatives
now, and they don’t have to put up anymore with a banking
system they find illogical, arbitrary, and coercive. 

Customer-centeredness is not a differentiator, but a survival
condition. And it starts with seeing things their way.
How to be ready
Last call

for customer-
centeredness
Challenges for the future of retail banking2015
The current organizational structure of banks is
still designed for the efficient exploitation of well-
known, relatively stable market opportunities. In
the fast-moving new scenery, organizational
structures must be designed for agile, ongoing
discovery, refinement and deployment of new
ways of bringing value and gaining the long-
term trust of customers whose needs and
demands are in rapid and continuous change.
This starts by working in cross-departmental
teams where different schools of knowledge
and passion are pooled and synchronized
rather than set to cancel each other.
How to be ready
Open 

silos, then 

break them
Challenges for the future of retail banking2015
Our business is not anymore just about figures that represent
value and change according to mathematical laws, market
forces, and legal regulations. That is the job of computers now.
Our business is about how people think about their future, about
what they work for, and about what they want to achieve. And
about people who want to do it in their own terms, and need a
good reason to let us be their enablers and advisors. We must
become the most authoritative experts on the moments and
places where these things happen, on what is the value beyond
money that people seek, and on what’s the most convenient,
intuitive, trustworthy, and accountable way to help them. 

Places where the financial and the non-financial collide are the
places to be.
How to be ready
Reach out and touch
para-financial
contexts
Challenges for the future of retail banking2015
Line of

Visibility
Next-generation

services
Next-generation

service enablers
• Must provide “anytime, anywhere”
transaction AND decision-making support
• Must use branches only for what they do
better than digital services
• May be aggregations of financial services
from different providers
• May rebundle financial with 

non-financial services
Customers
• Must provide straight-through, scalable,
safe support to customer-facing services
• Must extract value from processed data
• Must identify and embrace new enabling
technologies fast
Front-end
Back-end
Different possible scenarios for the future
banking business generate different
challenges at the front-end and back-end
level, that must be tackled with different
strategies.
In each of these two different places, for
optimal risk management, actions must be
taken simultaneously: fixing the basics in
the short term, extending services in the
medium term, and placing stakes in
potentially disruptive developments in the
long term.
How to be ready
Tackle challenges
with split 

front/back strategies
Challenges for the future of retail banking2015
Fix (urgent) Extend (mid term) Disrupt (long term)
To be ready for…
we must (example)…
• Optimize branch
networks for either self-
service or high-value
advice
• Fix pain points of
existing services in
critical touchpoints
• …
• Explore customer needs
that remain insufficiently
met
• Make preemptive fintech
moves in threatened
areas
• Evaluate and pilot our
own aggregator model
• …
• Explore turning branches
into relevant life event
venues
• Explore our own
rebundled services
(bundling financial and
non-financial services)
• …
Next-generation

services
• Must provide “anytime, anywhere” transaction
AND advice
• Must use branches only for what they do
better than digital services
• May be aggregations of financial services from
different providers
• May rebundle financial with 

non-financial services
Front-end
At the front-end, we are competing for
customer relevance with unbundlers,
aggregators, rebundlers, and next-
generation digital banks. The need for
relevance will affect digital channels
and branches alike.
How to be ready
Addressing
challenges at the
front-end
Challenges for the future of retail banking2015
Fix (urgent) Extend (mid term) Disrupt (long term)
• Encapsulate complexity
of legacy core banking
systems to enable
seamless omnichannel
• …
• Transition to agile,
straight-through
architectures
• Explore IoT as an
emergent enabler
• …
• Explore cognitive
computing as an
emergent enabler
• …
Next-generation

service enablers
• Must provide straight-through, scalable,
safe support to customer-facing services
• Must extract value from processed data
• Must identify and embrace new enabling
technologies fast
Back-end
To be ready for…
we must (example)…At the back-end, we are competing
with tech companies and next-
generation digital banks to be the
preferred partner to provide the
financial component of next-
generation services. This is true even if
the only customer-facing clients we
have are ourselves.
How to be ready
Addressing
challenges at the
back-end
Challenges for the future of retail banking2015
"Prediction is very difficult,
especially if it's about the future." -
Niels Bohr
Strategy in times of uncertainty is not a
matter of planification, but of readiness.
To remain relevant in an uncertain
future, we need to have a human-
centered strategic stance grounded on
knowledge about the changing needs,
expectations and practices of our
customers, and how we can meet
them by augmenting our differential
assets and abilities with technology
and design.
The future of retail banking2015
Disruptive 

insights
Research and
opportunities
Future 

vision
Direction and
experience concept
Experience
roadmap
Business transformation
roadmap and future customer
journeys
Experience
design
Solution and prototyping
Continuous
delivery
Development and
implementation
Phase 1 Phase 2 Phase 3 Phase 4 Phase 5
A well-defined method to envision, navigate, and enact the future
Our Strategic Design Process is our tried and tested method

to help organizations in banking and other industries

take command of uncertainty and create futures that keep and enhance customer relevance.
Challenges for the future of retail banking2015
I would like to end with an
amusing interview of the
comedian Louis C.K. to show
just how demanding
consumers are and what it
takes to keep them satisfied.
Desktop Research
Thank you.

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Challenges for the Future of Retail Banking

  • 1. Challenges for the future of retail banking2015 I would like to end with an amusing interview of the comedian Louis C.K. to show just how demanding consumers are and what it takes to keep them satisfied. Desktop Research Challenges for the future of Retail Banking
  • 2. 2015 Challenges for the Future of Retail Banking Slide with vertical Background. A change of rules b As of today, underlying conditions for the banking 
 business have changed profoundly and irreversibly: 
 • Intrinsic transaction cost approaches zero as clerical work has become automated and computing/ telecommunication costs keep on dropping. • Access to digital services has become pervasive thanks to mobile devices. • Distributed computing technologies have enabled business ecosystems and peer-to-peer architectures. • Pervasive data processing has created a flood of customer data. • An increase in choice has tilted the balance of power in favor of customers. 
 Under this new set of conditions, a new scenario 
 is unfolding. Changes can only grow.
  • 4. Challenges for the future of retail banking2015 Changes in three interdependent areas b Rapid changes are taking place in three dimensions or points of view on the banking business that are strongly interdependent. Most of new developments affect the three of these dimensions. Customers adopt those enabling technologies that cater to their fundamental needs and let them change their expectations towards what they can do with their money. New customer 
 expectations Businesses leverage enabling technologies and use them to cater to customers, often engaging in business practices that were not the norm in the banking industry before. New strategic
 trendsEmerging technologies give rise to new ways of conducting financial activity. New enabling technologies
  • 5. 2015 Challenges for the future of retail banking New enabling technologies These are some of the fundamental technology developments that are changing our idea of what banks can do.
  • 6. Our busiest branch in 2014 is the 7:01 from Reading to Paddington - over 167,000 of our customers use our Mobile Banking app between 7am and 8am on their commute to work every day.
 Ross McEwan,
 CEO, Royal Bank of Scotland
  • 7. Challenges for the future of retail banking2015 Extracting
 value from
 data Get data, make sense of it, and use it to give added value to either customers or third parties. New enabling technologies To show customers
 the big picture
 PFM tools, of which Mint is probably the most popular, can aggregate information from several accounts and use graphics to provide customers with actionable information on their budgets and spending. Fintech solutions such as Simple, Moven or mBank have incorporated PFM into their offering. To empower customers
 Simple applies transaction geolocation and identification of constant expenses to give the user a high control over their use of money. To open new 
 revenue sources 
 Cardlytics exploits card transaction data to enable banks to send relevant promotions to their clients.
  • 8. Challenges for the future of retail banking2015 Digital
 service
 interoperability Link and be linked, embed and be embedded, invoke asynchronously and be invoked asynchronously. Enable and leverage the building blocks of ecosystemic businesses, at the front-end as well as the back-end level. New enabling technologies To let customers give their money meaning
 Moven allows consumers to use desired goods from their Pinterest wishlists as savings goals. To enable
 third-party services
 The Open Bank Project is an open source API and app store for banks that empowers financial institutions to securely and rapidly enhance their digital offerings using an ecosystem of third-party applications and services. To support
 open innovation
 BBVA hosts annual innovation challenges where it opens its API to developers and allows them to develop new apps and services based on the bank’s information. This is a way for the bank to connect with startups and the community.
  • 9. Challenges for the future of retail banking2015 Mobile
 First Gone are the days when mobile interfaces were a “gracefully degraded” version of desktop applications. Mobile is now thought of as the preferred channel, and from there the rest of channels are worked out by progressive enhancement. New enabling technologies To keep up with the new generations
 Global research conducted by Gemalto reveals the strong level of engagement millennials have with their mobile in relation to financial services. To be where 
 customers are
 GoBank, Instabank, Moven, Simple, or Fidor are examples of mobile banks launched in recent years, offering mobile account opening, checking accounts, savings, and credit and debit cards, as well as advanced PFM tools and mobile payment solutions. To get to the 
 base of the pyramid
 M-pesa is the world’s leading peer-to-peer payment solution. It provides the underbanked / unbanked in developing countries with instant and convenient money transfers and payments. Mobile phones provide service access and user identity authentication via SIM services.
  • 10. Challenges for the future of retail banking2015 Making everything an order of magnitude faster Simplify processes, automate clerical work, leverage straight- through processing, proactive data analysis, and everything at your disposal to shorten waits from days to hours, from hours to minutes, from minutes to seconds. New enabling technologies To match the mobile context of use
 mBank simplifies mobile login to a 5-8 digit pin, shows the account’s balance in the pre-login screen, and enables 30- second loans. To capture data 
 at the right time
 As soon as the customer makes a transaction with the associated debit card, Moven sends a real-time notification allowing to categorize the expense and providing instant feedback of budget status. To exceed what the current system allows
 The Citizens Bank of Weir, Kansas, circumvents the national ACH fund transfer system, which involves next-day waits, and uses debit cards to enable real-time money transfers.
  • 11. Challenges for the future of retail banking2015 Higher
 level
 interactions Go beyond just enabling transactions or providing financial statements, and instead, occupy more stages of the customers’ financial journey. Enrich transactions with other real-world data, present them in ways that make sense for decision-making, support establishing goals and breaking them down to behaviours and actions, and even help establishing and maintaining habits. New enabling technologies To be there in planning and decision making
 mBank goes beyond the classic “table of numbers” statement format and provides graphical representations of statements and offered products. They also use gamification tactics to foster desired behaviours. Timely and relevant commercial suggestions are interspersed within statement data. To address unattended needs
 Even is a service for people who work by the hour, helping them even out their liquidity in a context of irregular earnings. To make marketing 
 more effective Using predictive analytics, Personetics creates a personalized list of actionable insights, supported by step-by- step guides to help users in real time.
  • 12. Challenges for the future of retail banking2015 Allow commitments and transactions over social networks Socially enabled spaces can provide services for identity authentication, individual and group communications, social object sharing, and reputation. These spaces can provide authenticated communications, commitment record, and transparency/accountability mechanisms over which mutual commitments and financial transactions can be conducted with an adequate risk control. Emerging products such as instant peer-to-peer payments, P2P loans, crowdfunding platforms, and sharing economy businesses are some of the applications. New enabling technologies To lend without having the money
 The top five P2P lending platforms issued more than 1M loans between them, generating over $10Bn a year. Lending Club alone issued over $3Bn in 2014 and was recently listed on the NYSE. To let fans support their favourite projects Crowdfunding platforms such as Kickstarter provide a way to raise money for new projects via a system of pledges and rewards. To let money enter 
 the conversation
 In November 2014 Snapchat, the ephemeral messaging app for millenials, released Snapcash, a service for P2P payments. Secure payments are provided by Square Cash’s e-mail payment system.
  • 13. New customer expectations Customers are 
 beginning to demand more 
 of those who handle their money, whether it’s banks or not. 2015 Challenges for the future of retail banking
  • 14. Silicon Valley is good 
 at getting rid of pain points. Banks are good 
 at creating them.
 Jamie Dimon, 
 CEO and chairman, 
 JP Morgan Chase
  • 15. Challenges for the future of retail banking2015 Right 
 here,
 right now People have learnt they can invoke services in the very place and moment when the need arises, and demand instant delivery whenever possible. Also, if a company is going to contact them proactively, they want this to happen right in the place, moment and context in which they find the message relevant and can immediately act on the call to action. New customer expectations To enroll 
 without hassle
 BankMobile allows customers to snap a photo of their driving license or ID document to enroll them into the bank. Customers can also take a photo of a bill to pay for it. To buy it 
 as you see it
 In June 2015, Pinterest launched Buyable Pins, with which Pinterest users can initiate an e- commerce transaction straight from their favourite place of product discovery. To spend
 without worry
 Moven’s Emergency Cash uses GPS and behavioural insight to detect that the customer is entering a place where expenses are made regularly. If the forecasted expense exceeds available balance, the app offers an instant loan to prevent overdraft.
  • 16. Challenges for the future of retail banking2015 It’s what
 the money
 does Financial professionals tend to think about money and financial operations as something abstract and independent from physical reality. But people find it very relevant what they want to do with their money. Also, many people find it important to know what banks do with their money and where they get the money from. New customer expectations To be an owner 
 and not just a fan
 Loyal3 lowers entry barriers to trading by enabling customers to “shop” for stocks based on the bands they love, and invest only $10 at a time. To know and share what the money’s for
 Smartypig, BBVA Compass’ goal saving tool, allows customers to set specific goals for their savings, accept donations from their Facebook friends, and even offers deals with specific retailers for additional discounts. To be proud of what your money is doing
 Triodos Bank’s balance sheet grew 8% in the first half of 2015, showing some customers want to have the guarantee that their money goes to support sustainable and ethical initiatives, rather than having the maximum rentability no matter what.
  • 17. Challenges for the future of retail banking2015 Get to know
 my world People prefer to work with words and concepts that are relevant to their everyday world rather than the financial world. A financial concept will be better apprehended if it's translated into terms that are familiar to the customer. New customer expectations To make decisions in a more familiar place
 mBank sells its products in a space that reminds more of an e-commerce store than a financial product catalog. To make it simpler to manage your money
 Simple informs the customer of something much more useful of their account balance: their “Safe-to-spend”, or the money surplus in excess of the foreseeable upcoming regular payments. To connect with new generations
 OCBC designed their new millenial-targeted bank “Frank” after conducting extensive ethnographic studies on the preferences and habits of young Singaporeans.
  • 18. Challenges for the future of retail banking2015 Peers as
 alternate
 authority When enabled by connections, transparent information and accountability mechanisms, people can provide each other trust (and trust-based transactions) in lieu of a central authority. New customer expectations To decrease 
 lending risk Before registering with the SEC, Lending Club enabled investors to look for borrowers with similar interests, on the hypothesis that this decreases likeliness of default. To delegate investment decisions
 eToro allows people to broadcast their trading. People can duplicate the trading decisions of the most successful traders. Popular investors get compensated. To evaluate a project’s potential
 One of the universal characteristics of crowdfunding platforms is transparency of the fundraising progress, which activates the effect of “social proof”. As the raised funds reach a significant portion of the intended goal, people begin to believe the project can be a success, and then they jump in.
  • 19. Challenges for the future of retail banking2015 Involve me
 only for 
 the important People hate having to do menial tasks and having their attention hijacked with things that are irrelevant to the present moment. They want to be as less involved as possible in the tactical execution of their decisions. They want to be there to decide things that matter to them, but from then on, they want things to go as seamlessly as possible. New customer expectations To automate low-level portfolio management decisions
 Betterment is a robo- advisor (a system that automates portfolio management via Modern Portfolio Theory). It has 93,000 customers, managing over $2.2Bn in client assets. No minimum investment is required and management fees are extremely low relative to traditional investment advisors. To make the most 
 of card perks
 Walla.by is an app that helps users choose which card to use for payments and provides recommendations on how to pay based on relevant loyalty schemes, discounts, credit balance, etc. To save 
 effortlessly
 Digit learns from your spending habits and sets small amounts aside for you to save without noticing.
  • 20. Challenges for the future of retail banking2015 Behavioural
 fitness Sometimes people want to be provided motivators, facilitators and triggers to help them engage in habits that will help them reach their goals. New customer expectations To make the most of financial products
 mBank awards their customers badges to reward exploring the products’ features. To save more
 for retirement
 Putnam Investments, one of the largest administrators of 401(k) plans in the US, allows users to compare their savings against other customers similar in age and income, and simulates the impact of keeping up with the best in their retirement. This nudges people into saving more. To avoid debt and overdrafts
 Thinkmoney helps customers keep their finances under control by setting aside the money they need to pay regular expenses such as bills. Only the remaining money can be used from the associated debit card.
  • 21. New strategic trends New entrants, new technologies, and new forms or relationship with customers are altering 
 our idea of how banking is done. 2015 Challenges for the future of retail banking
  • 22. If you think about the big guys now, it is not the banks, it is these four large tech companies that are worth more than us. They have more cash. They have less regulation.
 Ana Patricia Botín 
 Chairperson, 
 Santander Group
  • 23. Challenges for the future of retail banking2015 Progressive 
 inclusion As intrinsic transaction costs approach zero and self-service through digital channels becomes the dominant service modality, services that only were available to people in developed countries are now being offered to the underbanked in developing countries, while in the Western world, services that only a high worth minority used are being made more easily available to the general public. New strategic trends To lower entry barriers to investment
 Loyal3 allows its users to buy fractions of shares for as less as $10, and charges no fees. It’s the stock-listed companies who pay Loyal3 for the transaction costs plus a fee. In this way, they are bringing investment to non-investors. To allow you and me to invest like the rich
 iBillionaire mines public records in the Securities and Exchange Commission to find out the investing strategies of very high-worth individuals, and allows people to duplicate them via a specific ETF. To evaluate credit risk
 of the underbanked
 First Access provides to the unbanked and the undocumented alternate methods of risk scoring, based on location, strength of social network inferred from mobile usage, and other sources. This gives them access to loans that would otherwise bear unattainable borrowing costs.
  • 24. Challenges for the future of retail banking2015 Unbundling A high number of new entrants in the competitive space of banks are not trying to present alternatives to banks´ comprehensive product portfolios. Instead, they are targeting one single point of relevance for customers (with one or two underlying financial products that are sometimes provided by banks) and focus on solving it better than banks. Today, it’s possible to have your financial life covered through a bunch of these single-purpose solutions instead of dealing directly with a bank. New strategic trends To pay 
 Mobile payment solutions have so far been struggling to replace cards at the point of sale, but new initiatives like Apple Pay seem to be polished enough to become an alternative to cards and push banks and card issuers out of the paying touchpoint. To save
 While motivated and/or social saving tools like Smartypig or Coinc allow you to save for a specific goal, electronic money pools like eMoneyPool or Nickle join the effectiveness and social bonding of ROSCAs with the convenience of online channels, surpassing banks’ savings accounts in some aspects. To borrow
 According to a University of Edinburgh survey among 200 credit analysts from around the world, 75% of them believe that P2P lending is a threat to banks. Alternative financial services and consumer finance companies place borrowing outside of bank branches. Some of them are backed by banks, and some of them are not.
  • 25. Challenges for the future of retail banking2015 Aggregation Although most banks strive to be people’s one-stop shop for financial services, reality is most people have their financial life scattered through a number of different banks and other financial institutions. Aggregation solutions scrap data from multiple sources and integrate it to allow people to have a single place from which to monitor and control their financial life. This can deprive banks from the opportunity to be present in the moments of truth when people analyze and plan their finances. New strategic trends To better manage 
 your personal finance
 Solutions like Mint from Intuit can integrate data from a variety of banks. Simple and Moven do that also, but throw in being able to do transactions, positioning themselves as an alternative to banks. To join all your assets, monetary or not
 Fidor aggregates all user assets that represent purchasing power, including not only bank accounts, but airline miles, precious metals, cryptocurrencies, and potentially in-game currencies. With growing 
 institutional support
 Until today, aggregation efforts rely largely on scraping data from reluctant banks. Organizations such as the Financial Data and Technology Association in the UK have been working with governments and regulatory authorities to make data availability compulsory. As a result, in October 2015, the European Parliament has included this obligation in the revised Directive on Payment Services.
  • 26. Challenges for the future of retail banking2015 Some unbundled banking services are being repackaged as value-added components of a non-financial service’s value proposition. The ultimate provider of the financial service may have a banking license, but consumers don’t have the perception that they have been working with a bank. Although this is not a new phenomenon, current enabling technologies are making it more common. This may become for banks a new source of brand erosion. New strategic trends To pay for dinner
 The Opentable service started offering restaurant reservation. Now it also allows users to pay for their meals easily, doubling as a payment medium. To get a home The British real estate service Zoopla helps users find a new house and calculate its valuation. It includes comparators for services such as mortgages, insurance and utilities. Hoopla also enables banks such as Barclays to offer real estate searching services under a “powered by” agreement. This is a mixed example of aggregation plus this rebundling trend. Rebundling into 
 non-financial services To shop on credit
 Spain-based Carrefour Servicios Financieros is a regulated financial institution that offers debit/credit cards and loans. It’s co-owned by the French retail company Carrefour and Cetelem, a bank specialized in credit. However, customers perceive it as an extension of the retail chain’s value proposition.
  • 28. Some bankers and analysts think that Google, Facebook, Amazon or the like will not fully enter a highly regulated, low-margin business such as banking. I disagree. What is more, I think banks that are not prepared for such new competitors face certain death. 
 Francisco González, CEO,BBVA
  • 29. Challenges for the future of retail banking2015 Open questions for a new scenery The changes described above create a new set of conditions for banking, where some rules of business are not clear yet. Each player must look for answers that work for their customers, their strategy, and their assets and skills. How to tell apart fintech revolutions 
 from fintech flops?
 How will banks retain and develop 
 customer significance?
 What will be the role 
 of branches in the future? ? ? ?
  • 30. Challenges for the future of retail banking2015 Reports of banks’ death may have been greatly exaggerated. Some years have passed since the first analysts started to forecast significant erosion of banks’ business at the hands of fintech, and yet the most brilliant performers have so far failed to seriously threaten incumbents. Still, fundamental changes seem to be underway. Other disrupted industries, from travel to media, teach us that before every exponential growth there is a period where multiple challengers stagnate or die. Until someone gets it right. Some open challenges How to tell apart fintech revolutions from fintech flops?
  • 31. Challenges for the future of retail banking2015 Studies about millenials’ growing indifference to banks have contradictory results. While the often quoted Millenial Disruption Index seems to predict that banks may not be the next generation’s preferred choice for financial services, two qualitative studies from Designit in two different countries seem to indicate that when their first payroll arrives, explicitly disdainful millennials still will flock to their parents’ banks in search of a stable point of reference. And yet, the value proposition of “all your financial services, in one place, for life” seems to be losing strength in favor of more specific, contextually relevant alternatives. Some open challenges How will banks retain and develop customer significance?
  • 32. Challenges for the future of retail banking2015 Now that the rhythm of branch closures in Europe and the USA seems to be decelerating as new concentrated banks right-size their commercial networks, and in a context where branch visit frequency has dropped to once to twice a year, there is an consensus that customers still want branches for reassurance and advice. Then again, this consensus is among banks who do have branches. The success of direct banks in growing their customer bases tells otherwise. Meanwhile, different new models arise of what branches can or should be for customers. Some open challenges What will be the role of branches in the future?
  • 34. Scale and trust are the most significant differentiators between the types of organizations. Incumbents have it and protect it. FinTech disruptors have to hustle and differentiate to achieve either. Both are critical. Bradley Leimer, 
 Head of Innovation, 
 Santander Bank, N.A
  • 35. The world has started to dramatically change and banks are fighting to ‘protect’ their established business, to turn the oil tanker, to find new relevance and a new fit. Start-ups are natives of this new world, 
 and are fighting to achieve scale. Can legacy banks find the speed, agility and new business model faster than FinTech can find scale? Legacy infrastructure, entrenched culture, and a disengaged workforce make that very difficult. Jason Bates, Co-founder, Mondo Bank
  • 36. Challenges for the future of retail banking2015 Two key uncertainties As an inspiration for a classic scenario planning exercise, we have selected two of the many uncertainties of the current situation. Option A Option B Will larger banks maintain their dominant position? Large Banks Stay
 Yes, larger banks will largely domain the market. Large Banks Fail
 No, new entrants will eventually become the new dominant players. Will the portfolio of banking products as we know it remain the preferred financial product bundle? Banking Portfolios
 Yes, people will keep on choosing financial services from banks’ product catalogs. Contextual Services
 No, financial services will be unbundled and then rebundled under more contextually relevant criteria.
  • 37. Challenges for the future of retail banking2015 Larger banks invest in omnichannel front-offices, and modernize their core systems to keep with the evolving demands of customers, while learning to leverage their physical presence and trusted brands. Most of fintech companies end up either failing or being acquired by larger banks. Some independent fintechs remain, working at niches that expand the market rather than eroding it from banks. Some new, native digital banks enter the scene and make the market more interesting, but never steal significant market share before incumbents successfully copy their good practices. Future scenarios Large Banks Stay + Banking Portfolios = Digital Business 
 as Usual Banking Portfolios Contextual Services Digital Business 
 as Usual Banks Find People 
 where They Are Digital Neo-Banks 
 Take Over Banks Get Pushed Down to Wholesale
 LargeBanksStayLargeBanksFail
  • 38. Challenges for the future of retail banking2015 Waning branch visit frequency, and rebundling of financial services under non-financial services, deprive banks from traditional discovery touchpoints. Banks react by building a presence in the places and moments where the need for financial services arises, providing contextual services at points of relevance. Maybe even traditional banks’ brands become low-visibility umbrellas presiding complex brand architectures of rebundled services à la Procter & Gamble. All in all, the activity we today know as banking changes greatly, but it’s still made by the same companies. Future scenarios Large Banks Stay + Contextual Services = Banks Find People where they Are Banking Portfolios Contextual Services Digital Business as Usual Banks Find People 
 where They Are Digital Neo-Banks 
 Take Over Banks Get Pushed Down to Wholesale
 LargeBanksStayLargeBanksFail
  • 39. Challenges for the future of retail banking2015 A new cohort of native digital banks captures the majority of market share. Banking remains largely as we know it, but without the drag of inadequate cultures, friction-high legacy technologies, and increasingly unprofitable branch networks, these new entrants overtake previous incumbents by making it faster, cheaper and better, their exponential growth probably funded by deep-pocketed technology giants rather than old-money financial lords of yesteryear. Future scenarios Large Banks Fail + Banking Portfolios = Digital Neo-banks Take Over Banking Portfolios Contextual Services Digital Business as Usual Banks Find People 
 where They Are Digital Neo-Banks 
 Take Over Banks Get Pushed Down to Wholesale
 LargeBanksStayLargeBanksFail
  • 40. Challenges for the future of retail banking2015 Underlying financial products remain as always (deposits will be deposits, loans will be loans), but as highly efficient, low- margin commodities below the customers’ line of visibility. People don’t buy financial services to banks anymore, but to a set of new actors that master everyday context and significance and get to keep customers’ loyalty and margins, while banks work for them, constrained under ever-tightening compliance rules, in a heavily reintermediated landscape. Future scenarios Large Banks Fail + Contextual Services = Banks Get Pushed Down to Wholesale Banking Portfolios Contextual Services Digital Business as Usual Banks Find People 
 where They Are Digital Neo-Banks 
 Take Over Banks Get Pushed Down to Wholesale
 LargeBanksStayLargeBanksFail
  • 41. How to be ready
  • 42. We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don't let yourself be lulled into inaction. 
 Bill Gates
  • 43. Challenges for the future of retail banking2015 Some things
 are certain The future might be uncertain, but there are some actions that are clearly and urgently needed. Last call
 for customer-centeredness
 Open silos,
 then break them
 Reach out and touch
 para-financial contexts
 Tackle challenges with
 split front/back strategies ! ! ! !
  • 44. Challenges for the future of retail banking2015 The recent efforts from banks to become customer- centered are clearly insufficient. We say customers we give them expert advice but we give them hard-selling. We say we need to educate them about our products, but we haven’t educated ourselves enough about their needs and habits, and sometimes even about our own products. 
 We say we are all about people, but when they have a problem we won’t move a finger to go beyond what the teleprocessing system allows. Customers have alternatives now, and they don’t have to put up anymore with a banking system they find illogical, arbitrary, and coercive. 
 Customer-centeredness is not a differentiator, but a survival condition. And it starts with seeing things their way. How to be ready Last call
 for customer- centeredness
  • 45. Challenges for the future of retail banking2015 The current organizational structure of banks is still designed for the efficient exploitation of well- known, relatively stable market opportunities. In the fast-moving new scenery, organizational structures must be designed for agile, ongoing discovery, refinement and deployment of new ways of bringing value and gaining the long- term trust of customers whose needs and demands are in rapid and continuous change. This starts by working in cross-departmental teams where different schools of knowledge and passion are pooled and synchronized rather than set to cancel each other. How to be ready Open 
 silos, then 
 break them
  • 46. Challenges for the future of retail banking2015 Our business is not anymore just about figures that represent value and change according to mathematical laws, market forces, and legal regulations. That is the job of computers now. Our business is about how people think about their future, about what they work for, and about what they want to achieve. And about people who want to do it in their own terms, and need a good reason to let us be their enablers and advisors. We must become the most authoritative experts on the moments and places where these things happen, on what is the value beyond money that people seek, and on what’s the most convenient, intuitive, trustworthy, and accountable way to help them. 
 Places where the financial and the non-financial collide are the places to be. How to be ready Reach out and touch para-financial contexts
  • 47. Challenges for the future of retail banking2015 Line of
 Visibility Next-generation
 services Next-generation
 service enablers • Must provide “anytime, anywhere” transaction AND decision-making support • Must use branches only for what they do better than digital services • May be aggregations of financial services from different providers • May rebundle financial with 
 non-financial services Customers • Must provide straight-through, scalable, safe support to customer-facing services • Must extract value from processed data • Must identify and embrace new enabling technologies fast Front-end Back-end Different possible scenarios for the future banking business generate different challenges at the front-end and back-end level, that must be tackled with different strategies. In each of these two different places, for optimal risk management, actions must be taken simultaneously: fixing the basics in the short term, extending services in the medium term, and placing stakes in potentially disruptive developments in the long term. How to be ready Tackle challenges with split 
 front/back strategies
  • 48. Challenges for the future of retail banking2015 Fix (urgent) Extend (mid term) Disrupt (long term) To be ready for… we must (example)… • Optimize branch networks for either self- service or high-value advice • Fix pain points of existing services in critical touchpoints • … • Explore customer needs that remain insufficiently met • Make preemptive fintech moves in threatened areas • Evaluate and pilot our own aggregator model • … • Explore turning branches into relevant life event venues • Explore our own rebundled services (bundling financial and non-financial services) • … Next-generation
 services • Must provide “anytime, anywhere” transaction AND advice • Must use branches only for what they do better than digital services • May be aggregations of financial services from different providers • May rebundle financial with 
 non-financial services Front-end At the front-end, we are competing for customer relevance with unbundlers, aggregators, rebundlers, and next- generation digital banks. The need for relevance will affect digital channels and branches alike. How to be ready Addressing challenges at the front-end
  • 49. Challenges for the future of retail banking2015 Fix (urgent) Extend (mid term) Disrupt (long term) • Encapsulate complexity of legacy core banking systems to enable seamless omnichannel • … • Transition to agile, straight-through architectures • Explore IoT as an emergent enabler • … • Explore cognitive computing as an emergent enabler • … Next-generation
 service enablers • Must provide straight-through, scalable, safe support to customer-facing services • Must extract value from processed data • Must identify and embrace new enabling technologies fast Back-end To be ready for… we must (example)…At the back-end, we are competing with tech companies and next- generation digital banks to be the preferred partner to provide the financial component of next- generation services. This is true even if the only customer-facing clients we have are ourselves. How to be ready Addressing challenges at the back-end
  • 50. Challenges for the future of retail banking2015 "Prediction is very difficult, especially if it's about the future." - Niels Bohr Strategy in times of uncertainty is not a matter of planification, but of readiness. To remain relevant in an uncertain future, we need to have a human- centered strategic stance grounded on knowledge about the changing needs, expectations and practices of our customers, and how we can meet them by augmenting our differential assets and abilities with technology and design.
  • 51. The future of retail banking2015 Disruptive 
 insights Research and opportunities Future 
 vision Direction and experience concept Experience roadmap Business transformation roadmap and future customer journeys Experience design Solution and prototyping Continuous delivery Development and implementation Phase 1 Phase 2 Phase 3 Phase 4 Phase 5 A well-defined method to envision, navigate, and enact the future Our Strategic Design Process is our tried and tested method
 to help organizations in banking and other industries
 take command of uncertainty and create futures that keep and enhance customer relevance.
  • 52. Challenges for the future of retail banking2015 I would like to end with an amusing interview of the comedian Louis C.K. to show just how demanding consumers are and what it takes to keep them satisfied. Desktop Research Thank you.