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Challenges for the Future of Retail Banking

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.

Challenges for the Future of Retail Banking

  1. 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. 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.
  3. 3. Current trends
  4. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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.
  27. 27. Some open challenges
  28. 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. 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. 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. 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. 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?
  33. 33. Future scenarios
  34. 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. 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. 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. 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. 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. 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. 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. 41. How to be ready
  42. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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.

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