BBDO KNOWS

BANKING INDUSTRY CHALLENGES PART ONE 2013

BBDOKNOWS BBDO KNOWS BBDOKNOWS FINANCE CATEGORY BUSINESS CHALLENGES

SLOW MOTION RECOVERY BBDOKNOWS

BBDOKNOWS BBDO BBDOKNOWS EXPERT VIEW:
HOW WOULD YOU DESCRIBE THE CURRENT BANKING ENVIRONMENT?

“ZERO GROWTH”
LEILA GHORASHI, Senior Director, Corporate Executive Board Financial Services

SLOWKNOWS MOTION RECOVERY BBDO BBDOKNOWS

The economy remains fragile across many markets, there are of course promising signs in developing markets but the developed world is still “desperately seeking growth” (Deloitte) The economy and the slow motion recovery continues to hinder banking growth Weak credit demand from consumers and shrinking interest income are both impacting banking growth. The credit market remains especially sluggish in the Euro zone and well below its pre-crisis peak
(CEB)

IMPLICATIONS FOR THE BANKING INDUSTRY
LOW GROWTH

Bank profits at a global level remained negative for a fourth consecutive year in 2011 despite positive numbers in Asia (awaiting 2012 numbers)

Sources: Deloitte 2012, The Economist Euro Crisis Blog 2012, Corporate Executive Board 2012

BBDOKNOWS BBDO BBDOKNOWS EXPERT VIEW:
WHAT WILL BE THE MAIN SOURCES OF REVENUE GROWTH IN 2013?
“Opportunities are limited. We’re going to see another 12 months of cost administration and limiting the damage of past challenges rather than seeing major revenue growth.”

ANNABEL GORRINGE, Head of Content for Banking, Datamonitor

BBDO KNOWS BBDO CLIENT VIEW:
WHAT ARE YOUR MAIN CHALLENGES IN 2013?

“While we are recovering well from the financial crisis of '09, individuals and families are still not where they were. We are continually surrounded by world news that reminds us most of the world is still deep in crisis - this weighs heavily on underlying confidence in their future, confidence to make decisions and take action, willingness to try new solutions, and trust in a financial institution.” VP Marketing, Royal Bank of Canada

BBDO KNOWS BBDO CLIENT VIEW:
WHAT ARE YOUR MAIN CHALLENGES IN 2013?

Global Head of Marketing Communication, BES
PLEASE PLAY BES BANKING CONTEXT FILM

BBDOKNOWS IMPLICATIONS FOR BANKS
SLOW MOTION RECOVERY

The external context continues to limit growth and profitability for the banking industry and impacts the way banks do business as they operate in a “context of extreme efficiency” with “too many uncertainties” BES

IMPACTING PROFITS

CHALLENGE: Banks need to address their own business and business models in order to limit the impact of the external context and to increase their own profitability and thus aid the recovery of the industry

LIMIT THE IMPACT

SUPERVISION BBDOKNOWS

BBDOKNOWS BBDO BBDOKNOWS EXPERT VIEW:
WHAT ARE THE MAIN CHALLENGES FOR BANKS IN 2013?
“Regulation – which is having a huge external impact. We already know of many big regulations impacting the market- these we know about. What really interests us is what comes next.”
ANNABEL GORRINGE, Head of Content for Banking, Datamonitor

BBDO KNOWS BBDO CLIENT VIEW:
WHAT HAVE BEEN THE MAIN CHALLENGES IN THE PAST 20 YEARS?

“The financial crisis of 2008, the impact on the marketplace and the creation of excessive regulatory processes and hurdles.”
VP Marketing, Royal Bank of Canada

SUPERVISION BBDO BBDOKNOWS KNOWS

2013 looks to be the year of supervision, or as Ernst & Young deems it “intrusive supervision”, if 2012 was the year of regulation, this is the year of implementation and a new “era of regulation” Analsyts agree the regulators are “re-writing the rules” (Financial Times), “Governments and central banks across the world continue to take unprecedented measures to stimulate growth” (Boston Consulting Group) For bigger bank networks the challenge is that they are global, but regulation is national and varies according to market The resulting context for banks is ongoing uncertainty and the threat of continued imposed regulation and the resulting consequences, the CEB suggest this makes it very “difficult for banks to commit boldly to new products and services”

IMPLICATIONS FOR THE BANKING INDUSTRY
IMPACTING REVENUES

Rules and regulations are said to have reduced US bank revenues by $75BN since 2007

Source: Ernst & Young, Boston Consulting Group, Kantar Media, The Financial Times, Corporate Executive Board

BBDOKNOWS IMPLICATIONS FOR BANKS
INCREASED & CONTINUED REGULATION

As a consequence of the crisis the banking industry is subject to continued regulation. Banks, globally, have to operate in a context of yet more uncertainty as rules and regulations continue to change and impact their models & finances

IMPACTING REVENUES

CHALLENGE:
LIMIT THE IMPACT

Again, banks need to address their own business models in order to limit the impact of regulation. In the long term the desire is for greater independence and relaxed restriction, this relies on the industry regaining confidence

COMPETITION BBDOKNOWS

BBDOKNOWS BBDOKNOWS

“THE BANKING SECTOR WILL BE HYPERCOMPETITIVE FOR THE NEXT 3-4 YEARS.”
Booz & Company

BBDO KNOWS BBDO CLIENT VIEW:
WHAT DO YOU EXPECT THE FUTURE BANKING LANDSCAPE TO LOOK LIKE?

“It is almost certain that there will be further consolidation down the road… When the process is completed, it is estimated that three well-capitalised large banks will remain alongside a few smaller ones… Banks in general will be in a position to benefit from the economies of scale and synergies resulting from the process of consolidation. The emerging new banking landscape will thus be quite different.”
Marketing Director, National Bank of Greece

HYPERCOMPETITIVE BBDOKNOWS BBDO KNOWS
HYPERCOMPETITIVE = CLOSURES & CONSOLIDATION

• Analysts agree the context for banks is about to get even busier, the expectation is that the fittest will survive and that the global banking landscape will be redefined, with fewer remaining banks that are “less complex” (Ernst & Young) • There will also likely be a widening gap between the leaders and their followers

IMPLICATIONS FOR THE BANKING INDUSTRY
CLOSURES

Jones La Salle predict that as many as 50% of branch networks may be declared obsolete in the developed world by the decade’s end

Source: Ernst & Young, Jones La Salle

BBDOKNOWS BBDOKNOWS
“SOME OF THE BIGGEST COMPETITORS TO BANKS OVER THE NEXT 10 YEARS WILL BE THE TELECOMS COMPANIES... COULD STARBUCKS MOVE INTO BANKING?”
Jones La Salle

BBDO KNOWS BBDO CLIENT VIEW:
WHAT ARE YOUR MAIN CHALLENGES IN 2013?

Global Head of Marketing Communication, BES
PLEASE PLAY BES COMPETITION FILM

BBDOKNOWS BBDO BBDOKNOWS EXPERT VIEW:
WHA TARETHEKEYCHALLENGESIN2013?

ANNABEL GORRINGE, Head of Content for Banking, Datamonitor
PLEASE PLAY DM COMPETITION FILM

CHANGING SHAPE OF COMPETITION BBDOKNOWS BBDO KNOWS
NON TRADITIONALS

The shape of the competition will also change with Deloitte remarking traditional banks need to be aware of the “disruptors”. One of the biggest challenges will be defending the payments business which until now banks have owned Whilst Datamonitor don’t expect the non traditionals to make huge inroads, they do expect them to alter the structure of the market and change customer expectations with implications for the entire banking industry

IMPLICATIONS FOR THE BANKING INDUSTRY
DIMINISH REVENUES

PayPal is already half the size of CitiGroup’s global transaction services business

Source: Deloitte,Datamonitor

EXAMPLE: COMPETITION –PA YDA Y LOANS BBDO KNOWS WONGA, UK – COMPETITION
The growth of so called payday lenders has been significant. They position themselves as fast, friendly and accessible. Their websites are simple, clear and easy to use, the application process is fast and the decision even faster. Their communication is high profile, in the UK, Wonga sponsors popular entertainment shows and employs characters to bring a likeability and personality to the brand

http://www.barclays.co.uk/PersonalBanking/P1242603570446?WT.mc_id=301RDpingit

EXAMPLE: COMPETITION -SUPERMARKETS BBDO KNOWS MARKS & SPENCER, UK – COMPETITION
Marks & Spencer is one of the most well known and loved department store and grocery brands in the UK, its move into banking is significant, we await to see the uptake but we expect it to be healthy

http://bank.marksandspencer.com/

EXAMPLE: COMPETITION –OFFERING ADVICE BBDO KNOWS MONEY SAVING EXPERT, UK – COMPETITION
Money Saving Expert is one of the most popular finance websites in the UK. It is frequently cited as a go to tool for advice and more significantly a first port of call for advice, diluting the banks share of the finance conversation

http://www.moneysavingexpert.com/

BBDOKNOWS IMPLICATIONS FOR BANKS
INCREASINGLY COMPETITIVE LANDSCAPE

The banking industry is becoming increasingly cluttered. Banks are threatened with closure or consolidation or face losing business to non traditional entrants who are often more endearing to the consumer.

DIMISHING REVENUES

CHALLENGE: Banks need to continue to own the conversation. Banks also need to own innovation and not allow non traditionals to woo the disillusioned customer

INNOVATE TO
DIFFERENTIATE

& REMAIN RELEVANT

MODELS BBDOKNOWS

BBDOKNOWS BBDOKNOWS
“EVEN MORE THAN BEFORE TECHNOLOGY WILL EMERGE AS A KEY ENABLER AND DIFFERENTIATOR, RATHER THAN A COST TO MANAGE DOWN.”
Ernst & Young

BBDOKNOWS BBDO BBDOKNOWS EXPERT VIEW:
MODEL/CHANNEL

THE MODEL BBDO BBDOKNOWS KNOWS

The challenge for many banks is to find efficiency in the branch model whilst being present and relevant to customers in the online world Analysts suggest technology has the potential to be a strong point of difference. Around the globe we will see continued experimentation with formats and locations, Jones La Salle say getting to the right mix of mobile, direct and locations based channels will be crucial. In Asia and South America the question is what are banks going to do to make their branches more relevant and attractive to investors and landlords as the challenge is actually acquiring space

IMPLICATIONS FOR THE BANKING INDUSTRY
COST INEFFICIENCY

The branch model is proving expensive to maintain, it is believed to cost $0.15 to open a bank account online compared to $65 in branch according to Jones LaSalle. A transaction that costs $4.25 in a bank, would cost $2.40 in a call center and 0.20 online (Bain) yet branch aids satisfaction levels

Source: Jones LaSalle, Bain & Co

BBDOKNOWS IMPLICATIONS FOR BANKS
COSTLY OPERATIONS

Efficient, effective models are key to ensuring profitability and stability in the current context. The branch model is costly but consumers still value the transaction and interactions they make in person.

IMPACTS RETURN ON INVESTMENT

CHALLENGE:
BALANCE EFFICIENCY WITH
EFFECTIVENESS

Banks must uncover efficient models that continue to adequately service the customer across channels. Innovation in technology is one way to reclaim the territory of facilitators/innovators

BBDOKNOWS PLEASE NOW REFER TO CHALLENGES PART TWO

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