Digital transformation in retail banking is a thriving and complex phenomenon. We at Designit try to make sense of it by identifying leading trends in three deeply interdependent categories: new enabling technologies, new customer expectations, and new strategic trends. The future holds uncertainty and promise, but some immediate actions are patently necessary for banks that want to stay relevant in an increasingly dynamic scenario.
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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
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.