Harnessing the Potential of Digital in Financial Services

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Harnessing the Potential of Digital in Financial Services. Stephen Phillips September 23, 2013. Harnessing the potential of Digital in Financial Services. Context and perspective. Leading Digital practice. Organising for success. Consumers will be more connected with more devices. - PowerPoint PPT Presentation

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Harnessing the Potential of Digital in Financial Services Stephen PhillipsSeptember 23, 2013This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consentThis information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent#130916-Belgium Finance Conference v5STKContext and perspectiveLeading Digital practiceOrganisingfor successHarnessing the potential of Digital in Financial Services

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent#130916-Belgium Finance Conference v5STK

Consumers will be more connected with more devices2000200520102015

PCsSmartphones / PDAsNetbooksGaming consoleTVMobile Inter-net deviceCarDVD playersDomotics

?

E-book/ tabletsConsumers are increasingly connectedusing more and more devicesThis information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent#130916-Belgium Finance Conference v5STK90% of 18-29 year olds sleep with their cell phone; only 50% for those aged 50-64

online will continue to take SHARETotal time spent on social media has increased dramaticallyThe shift online is pronounced, particularly time spent using social media2_84This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent#130916-Belgium Finance Conference v5STK

Digitally active customers are more valuable

On-line and Mobile Use**Digitally active customers are more satisfiedPromoters generate more value

and refer more

DISGUISED MASS AFFLUENT SEGMENT EXAMPLEThis information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent#130916-Belgium Finance Conference v5STKTest

5Resulting in U curve effectDigitalisation lowers distribution costs by 10-30% for some customers but not for high-frequency users

HighLY digital customers have significantly higher usage

UK EXAMPLEThis information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent#130916-Belgium Finance Conference v5STKFinancial Services companies have much to think about in relation to our increasingly digital worldFundamental changes in consumer behaviourUnprecedented regulatory pressureFast moving technology trendsIncreasingly competitive landscape Legacy environments are slow and expensive to upgradeNot all technology & consumer trends are of equal importanceMust not divert attention from todays business and regulatory commitmentsReduce opex/capex vs. increase digital investmentWhere is current business model under most pressure?Which are the digital trends to really get behind?What is the scale of implied effort?What are priorities if cash constrained?SituationcomplicationsquestionsThis information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent#130916-Belgium Finance Conference v5STKContext and perspectiveLeading Digital practiceOrganisingfor successHarnessing the potential of Digital in Financial Services

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent#130916-Belgium Finance Conference v5STKMost banking transactions are already digitalRETAIL BANKING EXAMPLEThis information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent#130916-Belgium Finance Conference v5STKExample: Commonwealth Bank of AustraliaPeopleTechnologyStrengthProductivity

More customer needs met in core franchise One CommBankContinued growth in business and institutional bankingDisciplined growth outside of AustraliaCBA strategic focusTechnology deliveryCustomer: Revitalised front-line customer interfaceStrategic Advantage:

Best-in-class online platformsCore:

Core Banking Modernisation (CBM)123

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent#130916-Belgium Finance Conference v5STKAdvancements in technology improved face-to-face interaction with customers1Self-serviceFlagship Branch layoutCommsee real-timecustomer snapshot

Interactive/self-service options for customers to undertake all transaction banking requirementsCustomers become familiarised with technology options (iPads and iPod apps) thereby reducing the need for bank visitsSelf service options reduce demand on tellers and waiting timesFX and coin counting machines availableBranch acts as a one-stop-shop with a coffee shop, events and seminars for customers

Frontline customer interface used by bank teller staff/agentsSingle view of customerIntegrated with Core Banking to provide real-time transaction details for all personal accounts

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent#130916-Belgium Finance Conference v5STKBanks technology allows for easier customer banking at any time of the day2onlinemobilesocialPoint of sale

NetBank (online banking):Real-time account informationTools accessible on-siteGoogle Chrome integrationCommSec (online brokerage):Market leading platformEasy access to informationAbility to trade instrumentsFirstChoice and CommbizPortals for wealth and SME clientsCommBank app:Real-time view of A/CTrade stocks FX calculatorUndertake bank transfers and B-payKaching:Pay 3rd parties using mobile number, email, Facebook or bumpContactless paymentsProperty Guide app:Reality viewLoan repayment calc.Facebook:236k likesCompetitions, new products and offers announced via FacebookWinner of Facebooks Studio Live Awards for the smartest use of FacebookYouTube:~1.3m views~1k subscribersTwitter:~9.5k followersPi - Albert:Open platform POS payment method Businesses can create own compatible appsSecure merchant terminalQR scan, card scan, chip, NFC paymentsCustomers can split billPi Leo:Device plugged into iPhone/iTouch turning it into payment terminalSimilar payment functionality to Albert

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent#130916-Belgium Finance Conference v5STKCore Banking Modernisation has focused on improving processes to optimise front-end3Enhanced customer experience Greater efficiency Improved risk management Industrialisation Future proofing Real-time banking, 24x7 Instant account opening Customised product offers Straight through processing Faster speed-to-market Lower cost-to-income Greater system reliability Less manual re-work and errors Bank of the Future Greater flexibility Separate distribution/manufacturing Broader growth opportunities

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent#130916-Belgium Finance Conference v5STKIT investment has paid off in the form of more efficient processes5 years AgoToday50% of spend on infrastructure 23 data centres 70 severity 1 incidents 1,200 changes into production monthly26% of spend on infrastructure 2 data centres 7 severity 1 incidents1 3,000 changes into production monthly 74% customer-focused content

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent#130916-Belgium Finance Conference v5STKDigitalisation strategy helped CBA become the market leader#1 Online banking #1 In the youth segment >40% of all payment transactions #1iTunes app#1Social & Facebook 460k Kaching downloads 1st Real-time banking #1 Contactless acceptance points 4.25m active online customers >2.0m customers on mobile Main Financial Institution for1 in 3 Australians #1 Contactless (7M PayPass enabled cards)

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent#130916-Belgium Finance Conference v5STKContext and perspectiveLeading Digital practiceOrganisingfor successHarnessing the potential of Digital in Financial Services

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent#130916-Belgium Finance Conference v5STKWhat does it take to launch impactful digitalisation initiatives?Scope & focusAmbitionGovernance & capabilityInvestment principlesClear and unambiguous definitions of what is to be considered digitalSolid understanding of likely impacts of key marketplace and technology trendsPrioritised sense of the most important challenges and gapsTranslation of digital potential into busine

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