DBR 253 2018 Retail Banking Trends Predictions

ISSUE 253// DECEMBER 2017
2018 Retail
Banking Trends
& Predictions
DIGITAL PAYMENTS AND MOBILE WALLETS
Whether or not your organization decides to explore advanced tech-

nologies, open banking APIs or new payment opportunities, all bank-
ing solutions in the future will rely on a solid foundation of accurate
data and advanced analytics. The consumer is expecting you to know
them, understand them, and look out for them … and to use data
and advanced analytics to create better experiences.
— Jim Marous
Owner and Publisher
Digital Banking Report
Copyright 2017: DIGITAL BANKING REPORT (ISSN 2375-3455)

is published by DBR Media LLC, 8803 Brecksville Rd.,
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2018 RETAIL BANKING TRENDS AND PREDICTIONS
Table of Letter from the Publisher | 4 |

Key Research Questions | 8 |
Contents Key Takeways | 9 |
Executive Summary - Top 10 Trends for 2018 | 10 |
1. Improving the Customer Experience | 18 |
2. Expanding Use of Data and Analytics | 27 |
3. Supporting Multichannel Delivery | 40 |
4. Embracing Open Banking | 48 |
5. Building Fintech Partnerships | 60 |
6. Upgrading Digital Payments | 67 |
7. Navigating Compliance and Regulations | 77 |
8. Exploring Advanced Technologies | 80 |
9. Competing with New Challenges | 87 |
10. Testing Blockchain Applications | 92 |
Closing Thoughts | 95 |
Appendix: Research Methodology | 97 |
About the Author | 101 |
Thank You and 2018 Crowdsource Panel | 102 |
PAGE 3
Letter from the Publisher
DIGITAL BANKING REPORT Financial institutions continue to struggle that the industry believes will have the
Jim Marous, Owner and Publisher with complex regulations, legacy systems, greatest impact in the upcoming year.
jmarous@digitalbankingreport.com
new technologies and competitors, and an
8803 Brecksville Rd., As we look to 2018, the top 10 trends
STE 7-223, Brecksville, OH 44141
increasingly demanding customer base.
Insights from a crowdsourced panel of and predictions were almost exactly the
(216) 218-4257
100+ financial services influencers, same as in 2017. That said, the levels of
Issue 253 Cost $495 emphasis for many trends were expect-
combined with the results from a global
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For the seventh consecutive year, we sur- predictions, PSD2 and open APIs as well
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its copying or distributing this report in
services leaders for their thoughts on higher than last year.
part or in its entirety. (© 2017) Contact:
jmarous@digitalbankingreport.com
retail banking and credit union trends and
predictions. The crowdsource panel in- By collecting insights from leading
for reprints.
cluded bankers, credit union executives, influencers, ranking the trends using an
industry analysts, advisors, authors and industry survey, and including extensive
fintech followers from Asia, Africa, North analysis around each trend, we have de-
America, South and Central America, veloped the most comprehensive annual
Europe, the Middle East and Australia. trend report in the banking industry. For
the third consecutive year, the research,
We used the findings from our panel as analysis and Digital Banking Report were
the foundation to develop a global survey sponsored by Kony, Inc.
of executives involved in the financial ser-
vices industry, providing a prioritization We hope this year’s projections are help-
of our trends. Our global survey also pro- ful with your planning and implementation
vided an opportunity to do an end-of-year processes.
review of last year’s projections. Finally,
the survey collected insight into strategic Jim Marous
priorities for 2018 and the fintech players Publisher, Digital Banking Report
© 2017 Digital Banking Report. All rights reserved. PAGE 4

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2018 Retail
Banking Trends
and Predictions
KEY RESEARCH QUESTIONS
• What are the key trends expected in 2018 according to
our100-member crowdsourced panel?
• From the trends and predictions provided by the crowdsourced

panel, what are the most important trends for 2018 as rated
by both financial ser vices organizations and financial ser vices
industr y providers?
• Looking back to last year, how would these same organizations

re-rank the trends and predictions from 2017?
• What are the strategic priorities as ranked by financial ser vices

organizations globally?
• What traditional and non-traditional organizations pose the

greatest threat to the current banking ecosystem?

2018 Retail
Banking Trends
and Predictions
KEY TAKE-AWAYS
• The top three trends for 2018 are an increasing emphasis on improving
the customer experience, a better integration of delivery and communi-
cation channels and improved analysis and use of data and insights.
• The impact of advanced payment technology was less than expected,
while the importance of data, advanced analytics and Open Banking
APIs were greater than initially anticipated.
• The top three strategic priorities for 2018 were to improve the
digital customer experience, better leverage customer insights and
reduce costs.
• The greatest threat to traditional banking norms was expected to

come from fintech firms, large technology firms and large traditional
financial organizations.
• Payment ser vices were expected to be the most impacted product

categor y by outside competitors.

Executive Summary
The ranking of the top 10 trends and predictions was done by

providing a list of trends identified by our crowdsourced panel of
over 100 leading industr y influencers and asking banks, credit
unions and the supplier community globally to provide their top 3
predictions for 2018.
Of the organizations that provided their The fact that the list of trends identified
top 3 trends, the highest-ranking predic- by the financial services industry has
tion was that the industry was going to remained relatively consistent could be a
remove friction from the customer jour- symptom of a greater problem. The bank-
ney (61%). The next two most mentioned ing industry is moving much too slow,
trends were the improved use of data and legacy firms are failing to differenti-
and advanced analytics, and refinements ate themselves.
in multichannel delivery (mentioned by
57% and 42% respectively). According to Forrester, “In a market
where one-third of all customers say, ‘all
Interestingly, with the exception of one banks are basically the same,’ it would
trend (testing and use of blockchain tech- make sense for executives and their
nology), the trends and order of these teams to obsess over how to differenti-
trends were the same as last year. Last ate. Unfortunately, 2018 will look more
year’s trend of investment in innovation like a digital arms race between warring
did not make the top 10 this year. The incumbents than a year in which firms
importance and underlying components find new ways to specialize and create
of each trend differed in this year’s value for customers.”
research compared to the predictions for
2017. Regarding changes in emphasis for

this year’s trends, removing friction from the customer journey increased in
importance from last year, with 61% of organizations placing this trend in the
top three, compared to 54% last year. The trend around the use and application
of data also increased in importance from last year, with 57% of those sur veyed
placing this in the top 3 for 2018, compared to 53% in predictions for 2017.
Other notable shifts of importance included a greater belief that open banking
APIs would be important, less emphasis on regulator y changes and a greater
belief that advanced technology would have an impact in 2018.
CHART 1:
THREE MOST IMPORTANT TRENDS FOR
RETAIL BANKING INDUSTRY IN 2018
FIs and Suppliers
Removing friction from
the customer journey 61%
Use of big data, AI,
advanced analytics and 57%
cognitive computing
Improvements in integrated
multichannel delivery 42%
Open APIs 35%

Building partnerships between
banking and fintech firms 27%
Expansion of
digital payments 26%
Responding to
regulatory changes 15%
Exploring advanced
technologies (IoT, voice) 14%
Emergence of
new challenger banks 10%
Testing and use of
blockchain technology 10%
Investment in an
innovation accelerator 4%
or accelerator program
Source: DBR Research © December 2017 Digital Banking Report

CHART 2:
TOP THREE MOST IMPORTANT
RETAIL BANKING TRENDS IN 2017
FIs and Suppliers (n=404)
Simplifying the
customer journey 63%
Improving data analytics
capabilities & use of insights 52%
Improving integration
of delivery channels 42%
Expanding digital
payment capabilities 31%
Increasing commitment
to innovation 26%
Building partnerships between
banking and fintech firms 25%
Responding to
regulatory changes 20%
Impact of new competitors
(fintech firms, large 17%
tech firms, etc.)
Exploring advanced technologies
(IoT, Voice, Blockchain, 15%
Wearables, etc.)
Finding & utilizing

new talent 9%

Top 10 Strategic Priorities for 2018

When we asked financial services organizations worldwide about their top three
strategic priorities for 2018, there was a significant change in priorities compared
to last year’s research. While the order of the top three priorities remained the
same as last year, the priority of reducing operating costs dropped from 41% last
year to only 32% for 2018. At the same time, the priority of investment in inno-
vation dropped from the 4th position to 7th, with the number of firms mentioning
innovation falling from 26% to 22%.
The biggest jumps in strategic priority in 2018 were seen with the emphasis on
automating core business processes (up 13%) and recruiting talent (up 8%).
These shifts illustrate the growing importance of becoming a digital bank and the
impact of this transformation on the types of employees required to address new
challenges.
CHART 3:
TOP THREE STRATEGIC PRIORITIES FOR 2018
Q: What are your top 3 strategic priorities for 2018 as an organization?
Redesign/enhance digital
experience for consumer. 72%
Enhance data
analytics capabilities. 51%
Find ways to reduce
operating costs. 32%
Automate core
business processes. 31%
Recruit or retrain talent
to meet changing needs. 28%
Update/replace components of
your legacy operating system. 22%
Increase investment
in innovation. 22%
Meet regulatory and
compliance specifications. 20%
Improve components of
security and authentication. 11%
Invest in and/or partner with
alternative fintech providers. 10%

Here is what some of the crowdsourced panel had to say about 2018.
“2018 will see developments across the banking industry, including
a more mature application of fintech solutions, greater use of digital
payments, the opening up of banking thanks to API built architec-
tures, the first significant progress with blockchain technology, and
the harnessing of AI and RPA solutions. These changes will all occur
as global tech giants (including those from China) change the finan-
cial services battleground.”
– Roberto Ferrari, Chief Digital and Innovation Officer at Mediobanca Group
“Financial institutions have spent the last few years painting the vision of what it
means to be a digital bank. In 2018, we’ll see a significant shift from optimization
– streamlining and automation – to creating new revenue streams. This revenue
may come from new business models or simply new products and services, but
it signals a recognition that simply doing the same things better is no longer
enough.”
– Nicole Sturgill, Principal Executive Advisor, Retail Banking CEB
“2018 will see a radical change in how traditional financial institutions approach
digital transformation. The Chief Digital Officer concept will be replaced as com-
panies seek to embed digital transformation – for both customer value propo-
sition and business model transformation – into the roles and expectations for
every job in the organization and every initiative undertaken. Digital management,
much like risk management in recent years, will become everyone¹s job. This will
launch a wave of transformation, especially in traditional banking.”
– Mary Beth Sullivan, Managing Partner of Capital Performance Group
“2018 will be an amazing year in banking. The debate on crypto-

currencies will rage on, with jurisdictions legalizing and defining
ICO token issuance and definitions around cryptocurrency use.
Regulators will increasingly compete for dollars, talent and fin-
tech innovation through more open banking and fintech licensing
provisions, putting markets like the US further behind the eight
ball on basic capabilities like payments and challenger models.
Blockchain POCs will move to implementation, neobanks will start
to go global, and global technology experiences surfacing bank
and credit utility will start to emerge that undermine traditional
charters.”
– Brett King, CEO and Founder of Moven and author of Bank 4.0

“Investing in new skill sets will be critical. The digital talent gap is only widening
and organizations that can’t keep pace will be crippled by it. Now more than ever,
the right talent is truly a competitive advantage.”
– Danielle Guzman, Global Head of Social Media and Distributed Content at

Mercer
Regarding the use of an industry leading group of financial services industry influ-
encers, Jay Palter, Chief Engagement Officer at Jay Palter Social Advisory, said:
“As technological innovation accelerates and financial systems globalize, social

networks (such as LinkedIn, Twitter and Facebook) have emerged as indispens-
able and efficient tools for following key developments and insights from thought
leaders. Knowing who you need to follow and pay attention to online is more
important than ever.”

SUMMARY OF TOP 10
TRENDS & PREDICTIONS
1. Improving the Customer Experience. An optimal customer journey makes
every step and touchpoint in the buying cycle streamlined, efficient, consistent
and personalized from the consumer perspective. Financial institutions need to
reimagine their core journeys from front to back by addressing key customer pain
points and identifying new opportunities to delight customers in differentiated
ways. Digital channels and transforming the back office to a digital flow is at the
core of improving the customer journey in the future.
2. Expanding Use of Data and Analytics. Despite the vast amount of data avail-
able and the industry’s formidable resources, most banks and credit unions are
still far from realizing big data’s full potential. This gap in capabilities is caused
by competing priorities, the complexity of knowing what data to use and how to
collect the insight as well as the lack of a coordinated vision. Going forward, the
use of AI, machine learning and other advanced analytic tools will provide oppor-
tunities for greater personalization and channel optimization. Data and analytics
is at the core of every trend expected in 2018.
3. Supporting Multichannel Delivery. As mentioned in last year’s trends report,

the use of advanced analytics provides an opportunity for an optichannel™
experience, where the best channel is based on the customer’s needs and pre-
ferred channel. So, rather than offering all channels for a specific solution, big
data will enable an organization to point the consumer to the channel that will
provide the most personalized experience. As multichannel relates to a better
experience, the consumer expects to be able to move from channel to channel
without a ‘restart’ and does not expect to be ‘forced’ to use a physical channel
to complete a process.
4. Embracing Open Banking. With the formal introduction of PSD2 in Europe and
greater recognition of the power of open banking, the use of open APIs remains
a top priority and trend in 2018. The use of open APIs provides the opportunity
for combinations of products and services beyond traditional banking. If executed
well, traditional financial services organizations can be at the center of a consum-
er’s daily life. Otherwise, a traditional banking organization may be relegated to
be simply a provider of services for other firms.
5. Building Fintech Partnerships. Continuing a trend that emerged in 2016, lega-

cy organizations will continue to leverage the advantages of scale, stability, trust,
experience in navigating regulations and the access to significant capital as they
look for viable fintech partners. Conversely, fintech firms will leverage their agility,
innovation culture and technological expertise that legacy organizations seek,
with the resultant partnerships benefiting the end consumer. With the expansion
of data, analytics and open banking, the evidence of new banking + fintech part-
nerships will expand greatly in 2018.

6. Upgrading Digital Payments. The use of mobile payments continues to be less

than expected, illustrating the challenges in changing consumer behavior when
merchants and issuers can’t deliver a strong value proposition. While mobile pay-
ments at the POS may continue to lag in 2018, P2P transactions will continue to
skyrocket as new entrants like Zelle and current players like Venmo and Square
continue to gain momentum.
7. Navigating Compliance and Regulations. The financial services regulatory

environment continues to be highly uncertain and often has conflicting regulations.
In addition to causing a huge increase in the costs of compliance, they have also
impacted many organizations’ business models. In 2018, it is expected that gov-
ernmental agencies will continue to greatly lag consumer demands, but that both
traditional and fintech organizations will move forward with a ‘beg for forgiveness’,
rather than asking for permission mentality.
8. Exploring Advanced Technologies. Opportunities around blockchain technology

finally made the top 10 list of trends this year (number 10) as more organizations
embraced the potential of using data, analytics and digital technology to innovate
with new technologies. Of greatest appeal were technologies around artificial
intelligence (AI), the Internet of Things (IoT) and robo-advising. Tremendous mo-
mentum also surrounded the potential of using voice-first digital assistants in the
banking industry. This will be exciting in 2018 and more firms allow consumers to
perform basic transactions on their Alexa, Siri, Google Home or Apple Pod device.
9. Competing with New Challenges. The term “challenger bank” is widely used
to describe a banking organization, started from the ground up and built without
relying on another banking firm for back office support. While very common in the
UK, this breed of bank has not yet emerged in the US due to regulatory confu-
sion. With the advent of PSD2 and open banking, we expect most of the chal-
lenger bank activity to be in Europe, with the impact of larger tech firms (Google,
Amazon, Facebook, Apple, Tencent and Alibaba) becoming much more of a threat
to traditional banking models.
10. Testing Blockchain Applications. While bitcoin and other cryptocurrencies

taking the headlines in 2017, the greater impact over time may be the potential
for blockchain use in banking. From providing the platform for movement of data
and financial records, to the ability to become the foundation for identity man-
agement, banks of all sizes will be testing the capabilities of blockchain to save
money, reduce risk and even generate revenues.

Improving the Customer Experience
The battle for the banking customer has never been more heated,
with competition using the latest in data, technology and highly
targeted marketing as the weapons of choice. To win, legacy financial
institutions must win the hearts of customers with experiences that
rival the best in fintech and big tech organizations.
There has never been a more important Moving from a product-focus to a

priority in the financial services industry customer-focus. Consumers know the
than delivering an exceptional customer difference between an organization that
experience. For the past several years, is focused on selling more product and an
improving the customer journey was at organization that wants to genuinely help
the top of both the strategic priorities and the customer. The key is to provide value
trends mentioned by our industry insider and ser vices that are aligned to custom-
panel of influencers. ers’ needs.
To succeed, banks and credit unions need Focusing on long-term relationships.

to evaluate all components of their busi- The value of a customer engagement goes
ness model to reflect the continuously far beyond the initial sale. Banks and
increasing expectations of customers and credit unions must focus on the entire
members. Most importantly, organizations customer journey and add value at every
need to go beyond lip service, to delivering step along the way. This includes making
measurable improvements. sure the initial product sale is right for the
customer, and then partnering with the

customer through onboarding and advisory engagements. With the tremendous

amount of data and analytical tools available, there is more opportunity than ever
to recommend the right services, at the right time to form a stronger bond with
the customer.
“Building a great Improving ongoing engagement. The ability to collect and apply insight has
never been greater. The key to a great customer experience is to be able to
customer expe- apply this newly acquired insight, in real-time and in a personalized manner. This
rience doesn’t also means to effectively use multiple channels to build dialogue with custom-
ers through alerts and notifications. Many organizations have had tremendous
stop at the teller success using SMS messaging to help consumers benefit from opportunities and
line, call center or avoid negative surprises.
product develop-
Building trust. Financial services organizations are working hard to improve
ers. Organizations transparency and increase financial education that will benefit the consumer. This
must support a includes unbiased shopping tools, budgeting software, proactive product recom-
mendations based on stated financial goals and a focus on long-term relationship
strong customer building.
experience focus
from the top of Adjusting internal culture. Building a great customer experience doesn’t stop
at the teller line, call center or product developers. Organizations must support
the organization a strong customer experience focus from the top of the organization through all
through all customer-facing and back-office functions. Understanding that many back-office
functions have internal ‘customers’ who meet the consumer daily, all areas of the
customer-facing organization must be moving in the same direction. Part of this cultural shift will
and back-office also mean the utilization of new key performance indicators (KPIs) that are aligned
functions.” with experience goals.
Hiring the right people. It is more important than ever to find people who demon-
strate the right values and behaviors, understanding the role they play in creating
positive customer experiences within the organization. These people need to be
more empathetic and aware of the marketplace than any financial employees that
preceded them. Beyond strong product knowledge, this new breed of employees
needs to understand digital technology and the way customers do their banking.
They also need to know how other industries are improving the customer experi-
ence, and be willing to meet quickly changing expectations.
The Fintech and Big Tech Advantage

Fintech firms and big tech providers are leveraging their distinct advantages to
create better products and ser vices than incumbent financial ser vices organi-
zations, by focusing on customer insight, digital technology and being totally
customer-centric. Using simplicity and ease of use, combined with contextual
personalization is the key differentiator for the new challenger banks.
• Mobile delivery. Small fintech firms and large tech players (Google, Amazon,
Facebook, Apple, etc.) are focusing on mobile technologies for the delivery of
all financial services. Targeting Gen Z and the increasing number of people
who rely on their smartphones for every component of daily life, their aim is to
simplify all engagements by removing friction from existing processes.
• Channel agnostic. While many use the term digital-first, best players are
channel agnostic, letting consumers move from one delivery channel to anoth-
er without missing a beat. Instead of starting processes over, consumers can
use the channel that is best for them at any specific step in a process.

• Flexible and responsive. While most legacy financial institutions move like
a semi-tractor trailer, with wide turns and slower speeds, fintech firms and
large tech providers are like a turbo sports car – agile, responsive and able to
change directions without much advance warning. Traditional financial organi-
zations are constrained by their size, the age of supporting infrastructure, and
sometimes even the people at the wheel.
Time is Not on Banking’s Side

While many in the financial services industry have been concerned about the
challenge from digitally-focused startups, the real disruption may come from large
tech giants with brand new models of engagement. Whoever becomes the bigger
threat in the future, the need to change is immediate. Accenture found that digital
laggards in the financial services sector could stand to lose up to 35% market
share to digital-first competition.
New competitors are innovating and delivering customer-focused solutions at every

stage of their journey. Relationship models are changing, and the cost structure of
service delivery is reaching new lows, at the same time that engagement is reach-
ing new highs. The key for any organization is to move the customer to the heart of
every process and decision.
The engagement and experience expectations in the future will revolve around
immediacy and simplicity. From P2P money transfers to real-time payments and
mobile account opening, time will be the most valued commodity. At the same time
that transactional processes are being simplified, the definition of the banking
ecosystem is expanding.
In China, WeChat is combining financial services with eCommerce, insurance and

social engagement. With an engaged eCommerce customer base rivaling Amazon,
a huge proportion of WeChat users are now going about their daily banking activi-
ties through the WeBank platform. Differentiated financial products are able to be
developed using the customer insight collected with every transaction.
Action Items for Success

While the banking industry has talked about ‘customer-centricity’ and ‘improving
the customer experience’ for decades, most organizations have had difficulty
breaking down product silos or leveraging internal data to deliver a contextual
digital experience. “Long-term sustainable growth in the banking industry seems
only possible with a radical departure from a sales and product obsessed mindset
to one of genuine customer centricity, and further rationalization of strategies to
target the right markets, customer segments, and solutions,” states Deloitte.
According to the 85-page Digital Banking Report, Improving the Customer Experience
in Banking, the objective of delivering a positive customer experience has become
secondary to other bank priorities, resulting in a transactional banking relationship
for the customer. For financial organizations to change this dynamic, and meet the
evolving needs of today’s customers, there are five areas that have emerged as
crucial priorities:
1. Move the focus of digital engagement from cost reduction to experience

enhancement.

2. Leverage advanced analytics, machine learning and contextual engagement to

provide a highly personalized experience.
3. Allow the consumer to engage with their bank on the channels they prefer at
the times they want to engage.
4. Transition advisory and sales activities from being reactive to being proactive.
5. Engage end-to-end throughout the customer journey, from shopping to account

opening, to onboarding and through relationship expansion.
CHART 4:
CUSTOMER EXPERIENCE HAS A SALES AND
COST DRIVEN FOCUS
Q: What is your biggest objective for improving your customer experience?
Improving share
of wallet
29%
Gain efficiency 25%
Improve retention 21%
Improve advocacy 19%
Other (please specify) 6%

A positive customer experience is channel sensitive, with customers placing a

higher weight on digital customer experiences more than physical or call center
channels. In fact, in a recent J.D. Power survey, the largest banking organiza-
tions improved in overall customer satisfaction, while midsize banks declined and
regional banks plateaued. This was attributed primarily to improved mobile and
online satisfaction.
CHART 5:
BIG BANKS TAKE THE LEAD IN SATISFACTION
FOR THE FIRST TIME
802
799
796 799
790 796 793
785 784 794 791
781 789
787 787
783
759 760
759
743
2012 2013 2014 2015 2016 w1 2016 w2 2016 w3
Midsize banks Regional banks Big banks
Source: J.D. Power & Associates © December 2017 Digital Banking Report
As the banking industry responds to the “Age of the Individual”, big data and ad-
vanced analytics will define the winners from the losers. It is critical for banks and
credit unions to deliver on the personalization promise to win the battle of having
the best customer experience.
How customer insight is used can make a big difference to the customer experi-
ence – and ultimately to the profitability of the organization. The right information,
analyzed in the right way, can ensure that the financial institution can provide the
right offer at the right time – along with a seamless service at a lower cost. And
that has to be good for everyone involved.
Regarding where to start, Ron Shevlin from Cornerstone Advisors, Inc. probably
summed it up best in the Digital Banking Report, “Too much of the discussion
around the ‘customer experience’ reflects a desire to simplify the complex, and
find the silver bullet that fixes business problems and engenders customer loy-
alty. That’s too bad, because organizations that take a data-driven, process-ori-
ented approach to improving customer experiences—often fixing just one little

thing that stands in the way of customers’ satisfaction—can achieve competi-

tive advantages.”
Remember, customers no longer view their experiences within industry silos, but
instead, compare their experience to leading firms such as Google, Amazon, Uber
and Apple. Consumers want organizations to simplify engagement and make their
lives easier.
And the Winner Is …

Incumbent financial institutions will need to be effective at utilizing all of the
digital tactics and tools being used by smaller (and larger) competitors. Open
banking through APIs has the potential to provide fantastic customer benefits and
new seamless experiences. From advice and offers to frictionless payments and
financial management, new products and services that were previously impossi-
ble can be delivered.
“Financial companies need to introduce experiences that are

more like Tinder and Instagram rather than the traditional ser-
vices they provide today. It’s not just digital innovation or trans-
formation, where banks can compete for the future, it’s also
about re-inventing dated policies, processes and products for
new and more discerning generations of connected consumers.
UX design strategies and principles and human-centered design
belongs in the C-Suite now more than ever.”
– Brian Solis, Author, Digital Analyst and Anthropologist, Future Works
“Most for ward-looking banks have realized that a purely customer-oriented

experience will never enable a really defensible differentiation towards compet-
itors. Huge customer-driven programs have helped provide “error-free” transac-
tional experiences to their customers, but this isn’t enough. Organizations must
activate structured top-down initiatives to detail the brand promise across ever y
touchpoint and front-line behavior, with the final goal to create a deep and dura-
ble alignment with the human side of their customers – moving from ‘customer
experience’ to ‘human experience’.”
– Ambrogio Terrizzano, Financial Services Lead, Europe, Accenture.

CHART 6:
ORGANIZATIONS PLAN TO INVEST MORE
IN CX OVER THE NEXT THREE YEARS
How will your company’s investment in customer experience change in the
next 3 years?
9%
2% 9% We’re investing more.
We’re investing less.

80%
No change in investment
Unsure
“We are about to tear down product silos that confuse customers and get fo-
cused on being relevant, convenient and frictionless. Our new go-to-market will
be driven by attention and engagement. The winners will be the most efficient at
manufacturing and the most effective at engaging. Ecosystems will win beyond
single individual providers.”
– Nigel Walsh, Partner at Deloitte UK
“Human first: The core of banking and insurance is social - not the abundant tech-
nology but understanding human behavior and decision making will be relevant to
differentiate and design a superior value proposition.”
– Andreas Staub, Managing Partner at FehrAdvice and Partners AG
“2018 will bring more capabilities for shifting more control of

one’s finances from banks, merchants, or processors to the
end-user. These highly intuitive, trust-creating controls will ulti-
mately drive higher spend, loyalty, and trust, with lower misuse.”
Jim Van Dyke, CEO and Founder of Futurion.

“The great opportunity of 2018 will be to align cross-functional teams around

an early stage adaptive and collaborative process (using agile and scrum road
mapping). To move rapidly from a myopic operational and technology focus to
working from the ‘outside-in’, letting targeted customer segments/persona needs,
pain points and lifestyle triggers guide and inform strategy, experience design and
personalized content and tailored new products.”
– Mark Weber, CEO of Weber Marketing Group
“The banks that have done the hard work of changing their inter-
nal culture in order to welcome and foster change and elevate
the experience will retain the relationship with the consumer
and will compete successfully with new entrants whether they
are new challenger banks or the big tech firms (GAFA).”
– Duena Blomstrom, Chief Growth Officer Temenos, Marketplace, Temenos
“Mobile will be at the center of the customer experience in 2018. Voice bank-
ing will become more prevalent, especially for customers of larger banks, while
smaller community banks will continue to work to catch up, adding more mobile
banking options that remove friction and improve functionality.”
– Lori Philo-Cook, Owner of Innovo Marketing
“2018 will be the year of bringing human connection to the forefront of the custom-
er experience. Whether through digital, voice or face to face, financial services firms
will improve on the delivery of the most fundamental of human needs: to connect
with customers, let them know they have been heard, acknowledged and under-
stood.”
– Joe Sullivan, CEO of Market Insights, Inc.
CHART 7: MOST ORGANIZATIONS DO NOT HAVE

A FORMAL CUSTOMER EXPERIENCE BY TYPE
Large National Bank 55% 37% 8%
Regional Bank 50% 39% 11%
Community Bank 16% 77% 7%
Credit Union 27% 59% 14%
Overall 37% 54% 9%
Yes No Unsure

“Banks will increase experimentation with chatbots and interactive assistants to find
ways to interact with customers in a more meaningful way and to provide a better
customer experience. The focus will shift to evolving these experiences by integrating
more sophisticated data to gain insight, using machine learning to understand and
predict what a customer may need, and deploying bots that can help their agents do
their jobs better.”
– Tiffani Montez, Senior Analyst at Aite Group
“Mobile banking will continue to accelerate past standard banking

in customer preference as their digital, user, and customer experi-
ences become more enriched and data-informed. This will include
consumer-to-business frictionless digital banking, consumer-to-con-
sumer one-click payments, new cryptocurrency opportunities, pass-
word-free biometrics, locational services and offers, and conversa-
tional interfaces.”
– Kirk D. Borne, Principal Data Scientist and Executive Advisor at Booz Allen Hamilton
Improving the Customer Experience in Banking

The Improving the Customer Experience in Banking
report, sponsored by Deluxe Corp., provides insight ISSUE 247// JANUARY 2017
into the progress being made by financial institu-

tions globally in the area of customer experience.
Beyond a review of goals and investments, this
report delves deeply into the strategies, effective-
ness, challenges and measures around improving
CX in the banking industry.
The report includes the results of a survey of more

than 250 financial services organizations world-
wide. The report has 85 pages of analysis and 52
charts/graphs. Most importantly, the cross-tabs by Improving the
organization size and type allow a comparison of SPONSORED BY
Customer Experience
peers. There are also guest articles from Bank of in Banking
America, Brian Solis and other experts on custom-
er experience.
You can download an executive summary of this Digital Banking Report by clicking
here. Subscribers to The Digital Banking Report and those wishing to purchase
the complete report can access it immediately by clicking here.

Expanding Use of Data and Analytics
The most successful financial institutions are leveraging advanced

analytics to grow customer relationships organically. Using internal
and external data, customer needs are not just being met, they are
being anticipated.
There is a great deal of discussion The consumer’s buying process is no

in banking around the need to deliv- longer linear or predictable. Consum-
er personalized, timely and relevant ers often start using one channel and
communications and offers that drive switch channels unpredictably due to
customer profitability, satisfaction and individual circumstances. Customers
loyalty. Unfortunately, there is still a want to interact on their terms, expect-
large gap between the aspirations of ing advice and recommendations that
bank marketers and the ability to deliv- are similar to what they receive from
er on these goals. other digital partners like Google, Ama-
zon, Facebook and Apple. They want an
The challenge is that while there are experience where their needs are not
affordable and powerful tools available just met, but anticipated.
to create powerful omnichannel cus-
tomer experiences, most bank market- Despite the challenges, the new mar-
ers are using the same outdated data keting reality presents an exceptional
sources and marketing methodologies opportunity for banks and credit unions
they have used for decades. For those to build better customer experiences
marketers who do have the right tools and deeper consumer relationships. As
at their disposal, many indicate an referenced by IBM in two reports, the
inability to use these tools effectively. current state of marketing is both “the

best of times and the worst of times,” where being a marketer has never been
more exciting.
To capitalize on opportunities, banks must leverage the wealth of informational

assets at their disposal. They must analyze structured and unstructured customer
data, and deliver real-time insights that result in unique and compelling opportu-
nities for customer engagement. Most importantly, they must provide advice and
solutions across multiple channels.
Analytic Capabilities Lag Non-Bank Counterparts

Most research studies have found that data mining of structured internal data
such as basic inquiries, predictive modeling, etc. is on par with other industries.
There is a significant drop off in capabilities, however, when financial institutions
are asked about the ability to analyze unstructured data such as voice and social
streams.
While the investment in these types of analysis should lag the basic capabilities
described earlier (analyzing internal, structured sources), the growth and power of
advanced analytics that includes unstructured data needs to be tested by banks
to determine monetization opportunities (ROI).
CHART 8: PREDICTIVE ANALYTICS LIFECYCLE

Creating a data-driven
organization
Skills Tooling
Analysis &
Modeling
Acceptance
Frictionless Customer’s
Collection & Service Perception
Governance
Ownership
Data Deployment
Management and
Fulfillment
Sanity
Checks
Quality Technology
Source: Mobey Forum, VODW, 2016 © December 2017 Digital Banking Report

Best-in-class financial institutions will apply advanced analytics and artificial

intelligence to increase automation, improve personalization, reduce costs,
enhance the customer experience and even assist with compliance. The potential
of advanced analytics grows exponentially over time. Each iteration, additional
data source and performance measurement results in learning that enhances
the accuracy of the predictive models. It also allows organizations to refine data
sources as opposed to simply adding more and more data.
CHART 9:
THE NEW MARKETING ANALYTICS ROADMAP
DATA
COLLECTION
An audit of all
RESULTS DATA
data available
DEFINITION
Marketplace
reaction to market- An understanding of
ing strategy/ the data collected
campaign
MARKETING
DATA FORMAT
IMPLEMENTATION AND STORAGE
Execution of DATABASE A solution for
strategy and/or storing this
campaign data
DATA
OPPORTUNITY
ANALYSIS
ASSESSMENT
Value determination Examination of
of opportunities data collected
identified
Source: Velocity Marketing Analytics © December 2017 Digital Banking Report

Advanced Analytics and the 'Segment-of-One'

No two customers are exactly alike. Beyond traditional demographics, transac-
tions, product holdings and service preferences, marketers can now access on-
line activity logs, call-center interactions, direct feedback and social media usage
to build a "segment-of-one" profile. But, analyzing all of this internal and external
data requires converting data into actionable insights, which is made more diffi-
cult due to silos and the impact of locational data.
Beyond developing great internal reports, banks and credit unions must apply
these big data insights for the benefit of the customer. This includes not only pro-
viding real-time advice and solutions, but also anticipating future financial needs
on a customer level. Financial institutions must also determine the best way to
connect with customers to create a win-win opportunity.
As the volume of data has increased exponentially, the consequences of not

leveraging insight has never been more pronounced. Ineffective marketing, dissat-
isfied customers, missed opportunities and reduced wallet share and loyalty are
the costs of not communicating to each customer in a personalized manner. While
traditional analytics provide a great "rear-view mirror" perspective of what has hap-
pened, advanced analytics provides a "GPS" perspective of opportunities ahead.
The benefits of advanced analytics include:
• Targeting customers with highly relevant offers across online and offline
channels
• Understanding customers in the context of their relationship with your brand
• Engaging using the right channel, at the right time with the right message
• Predicting which customers may be at risk as well as the best way to retain
them
• Gaining a better awareness of customer needs, intentions and behaviors
through social media
• Maximizing customer lifetime value through personalized offers

Advanced Analytics and Contextual Cross-Selling

Successful customer acquisition and cross-selling has always depended on being able to deliver
the best solution, at the most appropriate time, using the channel the prospect or customer pre-
fers. Advanced analytics allows a bank marketer to not only identify potential sales opportunities
more accurately, but to do so in real-time. In the best situation, advanced analytics will identify
who may need a specific product or service before the customer knows this themselves.
In the past, the collection, cleansing, combination and enrichment of data was separate from the
analysis process (which occurred at different periods after the fact). In many cases, the analysis
was done as infrequently as monthly or even quarterly. This resulted in insights that were reactive
as opposed to proactive.
CHART 10: AI,

Deep
THE DATA SCIENCE learning
HIERARCHY OF NEEDS
A/B testing,
Learn/Optimize experimentation,
simple ML algorithms
Analytics, metrics,
Aggregate/Label segments, aggregates, features,
training data
Explore/Transform Cleaning, anomaly detection, prep
Reliable data flow, infrastructure, pipelines,

Move/Store etl, structured and unstructured data storage
Instrumentation, logging, sensors,

Collect
external data, user generated content
Source: Monica Rogati © December 2017 Digital Banking Report
Streaming analytics and other real-time analysis capabilities gives (banks) a window into opportunities
when and where they occur. Predictive analytics empower (a bank or credit union) to capture, examine
and respond to relevant customer data at the point of interaction, at the moment of engagement, to
optimize the customer experience and marketing and sales outcomes. In other words, this more-informed
and better-targeted approach lets an organization provide more relevant offers, thereby significantly
boosting cross-sell and up-sell results.

Advanced Analytics and Multi-Channel Engagement

One of the added benefits of advanced analytics is the ability to embed the
results of the analysis within both physical and digital delivery channels, as part
of business processes and within operational systems. This enables a bank or
credit union to deliver a consistent and optimized experience to each individual
customer across an entire organization.
Customer-facing representatives can be equipped to provide the best response

to a customer’s inquiry from both the organization’s and customer’s perspective.
Analytics can also deliver messages using the channel most preferred by the cus-
tomer as opposed to the channel most preferred by the financial institution.
Finally, detailed insights into individual and organizational behavior can enable
an organization to proactively resolve issues that may impact a specific segment
of the customer base. From interest rate changes to ATM outages, personalized
communications can be delivered to micro-segments of customers to improve the
overall customer experience.
Advanced Analytics and Social Data

To dig deeper into customer preferences, attitudes and behaviors, many financial
organization integrate social media insights. Social media is not only an excellent
source for consumer needs, but also significant life events. These added data
sources make the power of advanced analytics and micro-segmentation even
more powerful.
Social data is especially powerful in new customer acquisition. Beyond traditional

tracking and credit bureau insights, social insights can provide a better perspec-
tive on people similar to current customers. By communicating using messages
that resonate, results of marketing programs can be improved.
The Future of Advanced Analytics

The potential of advanced analytics grows exponentially over time. Each iteration,
additional data source and performance measurement results in learning that
enhances the accuracy of the predictive models. It also allows organizations to
refine data sources as opposed to simply adding more and more data.
Finally, with each iteration, predictability goes up while costs can go down, improv-
ing marketing efficiency. From the customer’s perspective, the messaging is more
“on target,” improving the customer experience, satisfaction and lifetime value.
According to IBM, “The use of new technologies such as the Internet of Things
(IoT) and mobile beacons is attractive but they are not currently used in high
volumes because companies recognize that they need to perfect the (data) basics
first. There is too little integration between systems and data sets to begin intro-
ducing even more touchpoints and variables into the mix. There is still a great
deal of scope to find growth in existing resources, if only companies are able to
focus on improving their integration.”
Big data provides the potential for big opportunities for banks and credit unions.
But the definition and application of ‘big data’ should begin with small steps
applied against internal data that is readily available. As successes are achieved,
the financial and operational benefits and learnings can be applied towards more
ambitious projects that are deemed to be financially viable.

According to David Gerbino, Principal of @dmgerbino consulting, “Financial

institutions that effectively leverage data and advanced analytics across the en-
terprise will be in a position to capitalize on newer technologies such as machine
learning and automation. Those firms who fall behind will need to quickly over-
come barriers that are preventing them from enjoying the benefits of advanced
analytics or they will find themselves too far behind to catch up.”
“Many banks have built their core operations on fragmented

systems aligned to products. This has distributed customer data
across multiple platforms, and banks recognize that they can-
not use AI effectively on data spread across the business. As a
result, organizations will develop strategies for building an Enter-
prise Data Architecture in 2018 which rationalizes and cleanses
their fragmented data stores.”
– Chris Skinner, CEO at The Finanser Ltd.
“2018 we will see tech-driven and data-driven leaders being appointed into c-level
positions in the financial services industry. This will occur because advisory boards,
shareholders and established CEOs recognize that the new era of customer-centric
digital ecosystems demand leadership with a digital and tech-driven mindset.”
– Dr. Robin Kiera, Insurtech and Fintech Thought Leader & Founder
of Digitalscouting.de
“Machine Learning applications will continue to mature, with

each vendor featuring a domain specific solution. Organizations
will work towards fully integrated, end-to-end data management
platforms to handle increases in different data streams, includ-
ing Deep Learning applications, transforming data into action-
able insights. AI and Deep Learning applications in voice recogni-
tion and video analytics will also accelerate.”
– Ronald van Loon, Director, Adversitement & Course Advisor, Simplilearn
“A new generation of AI solutions focused on the effectiveness more than on

the efficiency. Tools able to evolve from the pull conversation to the push sales.
The proactive offer of the right product at the right time with the right mes-
sage, as was done physically by the best sales for decades. Something able to
address the body of the customer base and not only the long tail of the most
rational person.”
– Matteo Carbone, Founder and Director at Connected Insurance Observatory

“Virtual replicas will move beyond industrial applications and

into financial services in 2018. A digital twin will not only pro-
pose an action plan for a human to review/do, it will intervene
on its own. As cloud-based processing power rises and tools be-
come more operative, running behavioral digital twin simulations
will become more prevalent.”
– Mike Quindazzi, Managing Director at PwC
“In 2018, organizations will embrace more automation and AI to provide a better
experience for customers across digital channels and to empower employees with
the tools and knowledge they need to improve their performance.”
– Jenni Palocsik, Director of Solutions Marketing at Verint
“AI will become a necessity for financial services to deliver better experiences,
lower costs, reduce risks and increase revenue – providing a competitive edge.
Most firms will need to evaluate a buy/partner decision to deploy solutions such
as chatbots, biometrics, fraud and voice or else fall further behind.”
– Dennis Gada, Regional Head, Financial Services at Infosys
“Artificial Intelligence (AI) will start to bear fruit, supporting more

complicated use cases for older adults such as decumulation
and financial planning for longevity. The combination of ad-
vanced analytics, Internet of Things (IoT), and big data will allow
banking to be more seamlessly integrated into our daily routine,
transforming voice into the new UI.”
– Theodora Lau, Director of Market Innovation at AARP
“Anticipatory UIs will grow as a result of natural language processing and AI,
prompting a shift in customer interaction from pull (the customer having to trigger
the interaction with the bank), to push (the bank initiating the interaction in a
non-invasive way).”
– Paolo Barbesino, SVP, Head of Digital, CEE Retail Unicredit
“With many organizations searching for deposits, those that do not have a sound
data-cleansing and enriching process, combined with a data-driven acquisition
and retention strategy, backed by a marketing automation platform, will find them-
selves on the losing end of 2018. Marketing teams and technology teams will
need to be in 100% alignment going into this year.”
– John Waupsh, Chief Innovation Officer at Kasasa by BancVue

“Many financial institutions will attempt to roll out tools powered by artificial intel-
ligence and many will fail due to a lack of clean and usable data. Leading institu-
tions will focus on getting their data organized, accessible, and clean, building a
solid foundation to ultimately win the race toward AI.”
– Matt West, Global Strategic Account Executive at MX
“Data will reach a point of critical mass not in terms of volume,

but in organization, collation, correlation and democratic distri-
bution. This will not just empower real time or strategic decision
making (“if this, then that”), but also determine long term road
maps, capacity planning, customization of products and services
for new acquisition and revenue channels, and critically cost
management. Data will be the constant atmosphere in which we
work and breath, rather than the ‘lake’ or ‘warehouse’ we visit.”
– Rob Findlay, Founder & CEO Next Money
“Could data scientists be last year’s hot occupation? Software could reduce the
demand, integrating deep learning and code into packages that detect fraud, im-
prove targeting, etc. Software goes where there’s demand — look for more data
science expertise to be deployed as software.”
– Tom Groenfeldt, Writer for Forbes
“Banks must continue to gain a deep understanding of their

customers or they will fall further behind. Transaction analytics
and data categorization are the foundation of all data-driven
initiatives. If financial institutions cannot categorize their data
and identify the right audience, they will find it difficult to move
forward in more advanced areas such as AI, Virtual Assistants
and Customer Journey Mapping.”
– Rob Heiser, CEO of Segmint

The Cognitive Bank of the Future

The end game for the banking industry is clear. By combining internal and exter-
nal data (both structured and unstructured), banks and credit unions can position
their organizations at the center of rapidly evolving banking ecosystems. Because
legacy banking organizations have such a wealth of knowledge, cognitive banking
organizations can provide ‘doorways’ for existing fintech firms to build relation-
ships with households they could not reach or serve before.
Leveraging the trust and immense data already in place, traditional banking insti-
tutions could transform from being ‘utilities’ to becoming central to a consumer’s
daily life. Most importantly, like what was referenced almost a quarter century
ago, a cognitive bank becomes a ‘learning organization’ improving decision mak-
ing and value to the consumer with each transaction and interaction.
The best way to prepare for the inevitable increase in competition that the contin-
ued expansion of banking services offered by Amazon, Google, PayPal, Facebook
and an increasing number of start-up banks will bring is to be proactive in the
development of personalized digital solutions. This will most likely involve new
partnerships inside and outside of traditional banking organizations and a redefi-
nition of what a banking ecosystem includes.
If banks don’t reorient their approach and radically accelerate their rate of prog-
ress, loyalty will suffer, and they will watch technology firms poach more busi-
ness. Meanwhile, their economics will erode as too many routine transactions
continue to flow through expensive branch and call-center networks.
There is a great advantage in the customer and member insights that traditional
financial institutions possess. The key is to apply these insights in ways that di-
rectly and positively impact the digital experience, similar to how large tech firms
currently improve shopping, social, search and payments.

CHART 11:
BARRIERS TO DIGITAL TRANSFORMATION
FACING TRADITIONAL BANKING PROVIDERS
Legacy technology environment
“Ultimately, AI
50%
technologies will
allow retail banking Lack of unified vision for “digital” across the organization
providers to focus 44%

on high-value activi- Lack of skills and expertise
ties and creative
solutions around 38%
the customer Lack of budget
experience. AI will 31%
eventually automate
Lack of clarity on which department(s) own digital
high-volume,
repetitive tasks 24%
and at a lower Lack of dependable technology partners
cost.” 19%
Source: Efma/Finacle © December 2017 Digital Banking Report
The Efma report found 58% of banking providers believe AI — along with several
other technologies such as advanced analytics, big data and open APIs — will
(eventually) have a significant impact on the industry. Noticeable progress is
already evident in areas like automation, machine learning and data-led intelli-
gence, which are already yielding new efficiencies. Still, AI will take several more
years to reach its full potential.
While financial institutions estimate AI’s impact to be low in the immediate future
— only 37% of respondents in another study by Infosys said they believe its impact
will be significant in the next two years — the financial services industry is invest-
ing much more in AI technologies than other industries, and these investments
will continue to grow steadily as banking providers get closer to achieving their
fully-functioning AI-driven systems.
Ultimately, AI technologies will allow retail banking providers to focus on high-value

activities and creative solutions around the customer experience. AI will eventually
automate high-volume, repetitive tasks and at a lower cost. It will also help banks
and credit unions manage their regulatory and compliance burden, generating audit
trails and flagging suspicious behaviors. It will even be capable of anticipating cus-
tomer service issues and sales inquiries.
These advances are being realized largely because many of the necessary ingredi-
ents for AI already exist. Regulatory and customer interactions are well documented
— a repository of data that can be mined when creating automation algorithms. Big
data tools can help parse and sort data for analysis. Machine learning technologies

can help tease out the insights and context lurking behind your data, then establish
predictive patterns.
All it takes is an AI solution to stitch it all together. And this is where many finan-
cial institutions are getting stuck.
That’s why three out of every four banking providers (74%) in the Efma study
believe partnering with third parties will be the best way for them to access these
exciting and innovative new technologies. Other options include funding internal
R&D (46%) and working with partners from different industries (42%).
The Royal Bank of Canada is one example revealing how financial institutions
are trying to wrap their arms around their AI and tech challenges. RBC is heavily
investing in the University of Toronto’s Rotman School of Management’s Creative
Destruction Lab — a lab that has nurtured some 50 artificial intelligence compa-
nies. The bank is going so far as to partner with the university to create its own
research lab focused on artificial intelligence, the RBC Research in Machine
Learning Center.
AI depends on the advancements in technology and partnerships within the finan-

cial services industry and with technology firms. While barriers exist and banks
may be slow to adopt to digital, AI, automation and other technologies are gaining
momentum and have the potential to mold the industry in completely new ways.
AI in Banking Digital Banking Report

The AI in Banking: The Next Frontier of Customer Experience report, provides insight
into the progress being made by financial institutions globally in the area of ad-
vanced technologies such as AI, chatbots and virtual assistants. Beyond a review
of goals and investments, this report delves
deeply into the strategies, effectiveness, chal- ISSUE 250// SEPTEMBER 2017
lenges and measures around improving the use

of data and analytics to improve the customer
experience in the banking industry.
The report includes the results of a survey of

more than 250 financial services organizations
worldwide. The report has 56 pages of analysis
and 30 charts/graphs. Most importantly, the
cross-tabs by organization size and type allow a
comparison of peers. There are also guest arti-
cles from industry leaders.
AI in Banking:
The Next Frontier in
You can download an executive summary of this Customer Experience
Digital Banking Report by clicking here. Subscrib-
ers to The Digital Banking Report and those wish-
ing to purchase the complete report can access it immediately by clicking here.

Machine Learning, AI and the Future of

Data Analytics in Banking
Article by Scott Hackl
Global Head of Sales for Finacle at
EdgeVerve
analysis — spreadsheets, data ta- After all, an AI initiative can encom-
bles and crunching numbers on a pass a vast array of digital com-
calculator. This is true artificial in- ponents — from big data to cloud-
telligence (AI). based solutions. Banks and credit
unions may want to adopt AI, but
Today, banks and credit unions can they must ask themselves...
increase customer stickiness by
having digital assistants effectively • Are you really ready for it?
manage routine inquiries and pro- • Have you appropriately positioned
vide personalized advice. All this yourself for success?
can be achieved with minimal day-
to-day oversight; it runs in the back-
Key Fact: Half of all banking provid-
ground, adheres to compliance pro-
ers believe AI will have significant im-
tocols, and can dynamically adapt
pact on their business model.
to new regulations.
Scott Hackl According to the “Innovation in Re-
Advances in automation and data-led tail Banking” report from Efma and
intelligence put sophisticated AI tech- Infosys Finacle, financial institutions
Traditional retail banking providers,
nologies within reach of traditional in- understand the potential impact and
weighed down by monolithic lega-
stitutions — those without the R&D benefits of AI, but they are still hes-
cy systems and ponderous regula-
skills and resources to pursue such itant to act. They are approaching it
tions, are in uncomfortable territo-
initiatives internally. This is because piecemeal, slowly building towards
r y. Advancements in fintech have
the modern AI platform can essential- AI competency by stacking on more
upended the industr y, enticing both
ly stand on the shoulders of the data and more of the innovative technolo-
large financial firms and smaller
and process automation technology gies they know they will need — cre-
tech startups to apply disruptive
trends that preceded it. The data sets ating the foundation they need one
technologies in ways that threaten
that capture the boundaries and ba- building block at a time.
the status quo.
sic interaction rules already exist and
To become more agile and remain are within the regulatory purview. But there are other significant im-
relevant, traditional retail banking pediments to progress. In particu-
Pursuing AI can be a complicated lar, the Efma/Finacle study found
providers find themselves explor-
journey, with success hinging largely that half of banks listed their legacy
ing their technological options with
on each organization’s prior experi- systems as the biggest hurdle they
focused intensity. In particular,
ences integrating new technological face, followed by a lack of unified
they’re looking for insights into cus-
innovations. vision (44%) and a shortage of skills
tomer behaviors.
and experience (38%).
The answer? • How frequently do you tackle
Advanced data analytics new IT projects?
• Is your organization comfortable
New innovations in data analytics with the process?
empower financial institutions with
systems that are so smart, they • How nimble are you?
learn on the go, automatically refin- • Can you keep your projects mov-
ing their algorithms and improving ing for ward, or do they bog down
their results over time. This isn’t with lengthy delays?
your grandpa’s approach to data

Supporting Multichannel Delivery
The majority of shopping and buying is moving from physical to digital

channels across industries. The impact on the banking industry can
be found in the new definition of banking convenience, and in the
increased preference for digital account opening capabilities. The
question is ... How will banks respond?
Banks have historically expanded question is – are financial institutions

branch networks to drive market expo- prepared for this shift in shopping and
sure, increase customer acquisition and buying behavior?
support deposit growth. With a bank on
every corner, storefront signage drove The 2017 Omni-Channel Shopper Study,
consideration and influenced purchase published by Novantas, found three
decisions, with consumers going from major shifts in consumer behavior that
branch to branch collecting product will impact bank distribution and sales
brochures and asking questions. strategies in the future.
Today, the vast majority of shopping for 1. A significant shift from branch
financial services (or virtually any con- dependence to digital preference
sumer product) is done using the key- 2. A redefinition of the drivers of bank
board on a computer or mobile device. consideration and purchase
As consumers in all age categories
become more comfortable with digital 3. An increase in demand for digital
technology, the shopping experience account opening
may even include voice commands. The

“The biggest news A Shift in Dependence on Branches

is that the drivers According to the Novantas study, “The majority of U.S. shoppers are now in seg-
ments that either don’t use bank branches, don’t care much for branches ... or
of ‘perceived conve- both.” This seismic shift in preference will have profound implications for the way
nience’ start with an banks and credit unions acquire and service customers in the future.
organization’s digital The research found that segments that placed the highest importance on branch-
capabilities. In fact, es for their checking relationship shrunk significantly in the past year, at the same
the importance of time that those segments with the lowest branch attachment grew. The same was
true for segments that were the most dependent on branches for ongoing transac-
branch-centric fac- tions. These segments also shrunk significantly over the past year.
tors have dropped
Bottom line, as transactions start to shift away from bank branches, the emotional
in each of the past attachment will follow. And as the emotion around branch banking changes, so will the
three years of the criteria for selecting a financial institution. In fact, Novantas found that the correlation
between a dense branch network and the propensity to acquire a higher share of de-
study.” posits has weakened significantly. Of special note, the correlation weakened the most
for older age segments and higher income segments.
The implication for financial institutions is that winning deposit and customer
share will no longer be determined as much by number and location of branch-
es, but by the ability to resonate with a prospect on a personalized level. Those
organizations that can target micro-segments more effectively and create positive
digital experiences will be more likely to win new business.
A New Definition of Convenience

The traditional definition of convenience in banking has revolved around the
proximity of the branch. With the growth in digital technology and the increased
acceptance of online and mobile banking, access to banking products and trans-
actions is no longer tethered to a physical location, resulting in a redefinition of
convenience. Today, while convenience is still the primary driver of initial consider-
ation, the importance of branches in that definition has gone down.
Novantas found the correlation between ‘perceived convenience’ and ‘consid-

eration’ to be slightly stronger than the correlations between ‘perceived conve-
nience’ and ‘purchase’, with both being very strong. The biggest news is that the
drivers of ‘perceived convenience’ start with an organization’s digital capabilities.
In fact, the importance of branch-centric factors have dropped in each of the past
three years of the study. This is especially true for consumers aged 18-54.

CHART 12:
BRANCH PROXIMITY NO LONGER CONSIDERED
NUMBER ONE DETERMINANT OF CONVENIENCE
Q: What factors make a bank most convenient?
Rank Change
(2014-2016) Factor
A Leading Online/Mobile App
20%
2 to 1 26%
28%
No Foreign ATM Fees
18%
3 to 2 23%
25%
Branches Near Me
30%
1 to 3 18%
16%
Lots of Branches and ATMs
16%
4 13%
11%
ATMs Near Me
10%
5 9%
9%
Convenient Branch Hours
4%
6 6%
6%
Phone
1%
7 4%
4%
Branch Centric Factors

2014 50%
50%
2015 36%
2016 33%
2014 2015 2016 * Excludes incomes of less than $25k

Source: Novantas © December 2017 Digital Banking Report
This ongoing shift in the definition of ‘perceived convenience’ benefits the larger financial institutions that have
invested the most in digital capabilities. According to Novantas, “Banks lagging in digital innovation and product
development risk losing out to those banks on the leading edge, but also to fintech providers positioning them-
selves as technology-first bank alternatives.”
The importance of increasing investment in digital capabilities is profound. There also needs to be significant mar-
keting funds allocated to promote awareness of digital capabilities (with an emphasis on mobile).
The 2017 shopper study found that the average consumer only considers two banks when shopping for a new
checking account. Without an awareness of digital leadership, a bank or credit union could be removed from the
consumer’s decision set much earlier than in the past.
A New Customer Journey

The impact of an Amazon shopping experience has impacted the way consumers want to purchase financial
products as well. The digital consumer has less patience for being ‘forced’ into a physical branch to open a new
account and is comfortable with managing more of their life on a digital device. As illustrated in the 2017 Account
Opening and Onboarding Benchmarking Study, industry leaders are providing customers the ability to open accounts
starting and ending on online or mobile devices.
The Novantas shopping survey found that 79% of consumers are doing at least some of their shopping for new
checking accounts digitally, with 54% using only digital channels. These digital-only shoppers are both older and
wealthier, with the size of the digital-only shopper category increasing in size.
CHART 13:
CONSUMERS WANT TO OPEN THEIR NEW ACCOUNTS DIGITALLY
79% 54% 33%
Shop digitally Shop digitally Want to open new

(in part) (exclusively) accounts digitally
Source: Novantas © December 2017 Digital Banking Report

“Digital is funda- Aligned with the preference to shop digitally,

there has been a corresponding increase in the
mentally changing preference to open accounts digitally, according
marketing as we to Novantas. Over a third of consumers prefer
know it. Not long to open their account digitally, with the number
being significantly higher (46%) if the consumer
ago, marketers shopped using digital channels exclusively.
previously viewed Unfortunately, many consumers continue to
digital marketing as be forced to use channels they do not prefer.
simply one category According to Novantas, “Fewer than 9% of
consumers are actually successful in applying
within marketing — for, and opening, their accounts entirely online.
one tool of many in This indicates a significant pent up demand;
if banks fail to address this gap, it’s almost
the marketer’s kit. certain an enterprising fintech firm will.”
Increasingly, percep-
The banking industry needs to realize that,
tion is shifting to a while the consumer has been patient in the past, the tolerance for substandard
more holistic view in offerings and service will not go unpunished. A poor digital experience ranked below
which all marketing overall bad service or high fees but higher than the impact of a closed branch. In
other words, digital service trumps branch proximity as a retention tool.
is part of the digital
world.” A Call to Action
The industry is deluged with research on the importance of branches. Study after
study proclaims that consumers want branch access and they don’t want their
favorite branch closed. While there are indications that physical locations still are
needed, the importance of banking branches in relation to digital capabilities has
seen a continuous decline.
The importance of investing in digital capabilities has never been greater. With
consumers only considering two banking organizations in their shopping process,
and doing their shopping on digital channels, coming in third is not a viable long-
term strategy. To be considered, a bank or credit union must not only have a
strong digital banking offering, but promote this offering as well.
The same applies for digital account opening capabilities. Digital account opening
is the norm in other complex categories such as P&C insurance, investments,
and even health insurance — there is no reason why banks cannot also crack the
code. As digital acquisition rates increase industry-wide, banks who fail to enable
a digital opening process risk losing their fair share of acquisitions and ultimately
will face a shrinking portfolio.
The Importance of Multichannel Delivery in Marketing

Digital is fundamentally changing marketing as we know it. Not long ago, market-
ers previously viewed digital marketing as simply one category within marketing
— one tool of many in the marketer’s kit. Increasingly, perception is shifting to a
more holistic view in which all marketing is part of the digital world.
Marketers now view digital channels as the cornerstone of their strategy, and
many of these channels now anchor marketing functions. Marketers today have
mind-numbing number of technologies, channels, and tactics to choose from. The
first step toward a solid strategy is finding focus amid the noise — figuring out
what works… and what doesn’t.

“In 2018, mobile will surpass desktop as the top digital channel
for retail bank account opening. Consumers will move from just
browsing to actually buying financial products from their phones.
This move will be supported by superior security from mobile, vastly
improved customer interfaces, and the convenience of off-hours
access that mobile provides.”
– Don Bergal, CMO at Avoka
“Operational processes and technology infrastructure created for branch-centric

workflows will become the limiting factor for adequately serving digital-first cus-
tomers. Institutions will be forced to migrate from digitizing self-service to provid-
ing exceptional service digitally.”
– Wade Arnold, Advisor at BillGO
“Advertisers will realize that context does count. While they’ve appreciated the
precision targeting of social platforms, there will be a growing appreciation in
2018 that the trustworthiness of the content on each platform has a big impact
on their brand message.”
– Jennifer Grazel, Global Director, Vertical Marketing for LinkedIn
“One of the biggest trends is clicks to bricks. We are working with

many of our clients to connect the online digital experience to the
traditional branch experience with the use of tablet friendly, open
branch workflow experience for loans and deposits.”
– Kyle Kehoe, President, ACTion Division of CRIF Lending Solutions
“The emergence of Gen Z (born 1996 and after) will underscore the urgency for
small- and mid-sized institutions to accelerate their digital evolution; both in terms
of customer experience and workplace culture. As this constantly-connected
generational cohort enters adulthood, their digital preferences (e.g. mobile-only,
immediacy, personalization, security) and pragmatic, independent personalities,
will challenge financial service managers and marketers alike.”
– Jim Perry, Consultant and Strategist for Market Insights

CHART 14:
BANKING MODELS OF THE PAST AND FUTURE
The Past
Branch
Call center Online Mobile Mail
The
Future
Bank branch Online
Mobile
Call center Mail
Open APIs
Source: Deloitte © December 2017 Digital Banking Report

“2018 will see banks getting much more serious about digitizing
their current analog processes with a particular focus on their
commercial customers and on mobile. Loan processing, account
opening, service subscriptions, problem resolution and one-to-many
payments are all examples of current processes that are ripe to be
reimagined in order to gain speed, efficiency, and scale.”
– Chris Nichols, Chief Strategy Officer at CenterState Bank
“Especially for emerging markets around the world, there will be increased impor-
tance of the mobile channel and increasingly the growth of smartphones changing
access to banking (and financial services in general). The use of new ways to inter-
act with customers, and increasingly the use of chatbots, will be a key trend.”
– John Owens, Senior Digital Financial Advisor for Digital Financial Advisory Services
“Financial institutions will pull back from dramatic changes and take a more practical
approach to the industry’s challenges, such as service delivery and channel utiliza-
tion. With 2018 being the year of small business banking, there will be increased
investment in technology (or partnering with fintech firms) to simplify business loan
processes, using branch staffs for selling these services.”
– David Kerstein, President of Peak Performance Consulting Group
2017 Financial Marketing Trends Report

The 2017 Financial Marketing Trends report, spon-
sored by Deluxe, provides insight into the strate-
ISSUE 248// MARCH 2017
gies, tactics, priorities and challenges of financial

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previous trends and a breakout of results by size
and type of organization.
The report is based on a survey of close to 300

financial services marketers worldwide and in-
cludes 78 pages of analysis and 43 charts.
2017
You can download an executive summary of this SPONSOREDBY
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Embracing Open Banking
Open banking enables third parties to develop new products and

services through the use of APIs. By working together and taking
advantage of APIs, banks and fintech firms can leverage their
complementary strengths, enhancing the customer experience much
more than either entity could do on its own.
Organizations in all industries are bat- banking customers have a relationship

tling for customers based on providing with at least one non-traditional firm.
a superior customer experience. The
banking industry is no exception. In According to the World Retail Banking
fact, as digital banking applications Report 2017, published by Capgemini
have grabbed a greater share of cus- in conjunction with Efma, fintech firms
tomer transactions, the need to provide are more likely than traditional banks
an easy-to-use, frictionless experience, to provide consumers with positive
with new digital services offered across banking experiences.
a greater number of touchpoints has
never been greater. That said, more collaboration than ever
is taking place between banks and fin-
To satisfy these increased expec- tech firms, leveraging the benefits that
tations, financial technology firms each can bring to the table to create
(fintechs) have entered the financial customer-centric solutions. This collab-
services marketplace. While most of oration has led to the emergence of
this competition has not achieved sig- Open Banking and APIs, using custom-
nificant scale, that shouldn’t signal that er data and innovations to create new
these solutions are not important to revenue streams and more contextual
the industry. In fact, nearly one-third of services.

While APIs are not new to banking and are nothing more than a structure for how
software applications should interact, they provide the gateway for innovative,
contextual solutions that would be difficult to offer without Open Banking. As out-
lined by the WRBR, there are three types of APIs:
1. Private APIs: These are APIs that are used within the traditional banking or-
ganization, reducing friction and enhancing operational efficiency. A vast majority
(88%) of banks viewed private APIs as essential in 2015.
2. Partner APIs: These are usually between a bank and specific third-party partners,
enabling the expansion of product lines, channels, etc.
3. Open APIs: In this scenario, business data is made available to third parties
that may not have a formal relationship with the bank. Because of the structure
of open APIs, many banks have a greater concern about security.
Most banks ease into the use of APIs, moving from private, to partner and some-
times to open APIs. It is believed that, over time, APIs will evolve to the more ex-
tensive options in response to the consumer desire for greater digital solutions not
currently provided by legacy organizations. This will also occur as both fintechs and
traditional banking organizations understand that they need each other’s strengths.
This collaboration will enable both banking organizations and fintech firms to offer
more to customers than previously possible.

CHART 15:
BENEFITS OF BANK AND FINTECH API COLLABORATION
Banks
Broad Extensive Regulatory Funding
Customer Base Network Expertise Capabilities
APIs
FinTechs
Innovative Nimble Distinct
Agility
Products Solutions Culture
1 2 3 4
Effective Rise of Customer-Centric Enhanced

Utilization New Business Products and Customer
of Data Models Services Trust
Source: Capgemini Financial Services Analysis © December 2017 Digital Banking Report
APIs can help banks pursue new distribution channels, while also finding new ways to
improve the customer digital banking experience. In addition, the product development
process can occur more quickly, responding to rapid changes in digital technology and
capabilities (voice banking, P2P, loan processing, risk management, etc.). According to
the WRBR, 78.3% of banks are counting on APIs to help them improve the customer
experience, with fintech firms agreeing. They also agree that new revenue streams are
possible.

CHART 16:
BENEFITS OF IMPLEMENTING BANK APIs
Enhanced Customer
Experience
Access to Additional 80%

Customer Data New Revenue
60% Streams
40%
20%
0%
New Products and Increased Agility
Services
Reduced Time to Enhanced Operational

Market for Products Efficiencies
Note: The percentage represents the FinTech and FinTech Perspective

banking executives who have given a rating of 6
Bank Perspective
or 7 on a scale of 1-7 for each of the benefits.
Source: Capgemini Financial Services Analysis © December 2017 Digital Banking Report
Alternative API strategies could include:

• Create new businesses: Increase the reach and depth of product lines or
segments.
• Encourage innovation: Facilitate innovation not possible with internet

resources.
• Increase speed of change: By breaking down silos, APIs can improve

speed to market.
• Decoupling platforms: Rejoining platforms through APIs reduces cost of

development.
• Embrace IoT future: APIs can allow for a future where the consumer is
identified by their device.

CHART 17:
STRATEGIES FOR BANK API IMPLEMENTATION
Embrace Create
Connected New
Customers Business
API
Decoupling Strategies Encourage
and Innovation
Resiliency
Fast Agile
Change
Source: Capgemini Financial Services © December 2017 Digital Banking Report
Underlying Market Forces

The banking industry has been treading water (or worse) since the global financial
crisis. Revenues have lagged, and the ability to cut costs further has become much
more difficult. At the same time, competition from financial and non-financial organi-
zations has eaten away at the edges of banking’s value chain.
Most of this competition has leveraged consumer data, advanced analytics and
new digital technology to deliver an improved customer experience, further reduc-
ing profits of legacy banks. All components of the banking ecosystem have been
attacked by new players. Most recently, new challenger banks have come on the
scene, offering a holistic mobile-only banking solution.
As if these combined forces weren’t enough, regulator y changes (mostly across

the EU and in the UK) have enabled an ‘open banking’ model, where customer
transaction data is made available to third parties. The regulations also in-
crease the transparency of product and pricing information. This could result in
disintermediation of customers, with the ease of this switching process made
easier than before.
In a worst-case scenario, legacy banking organizations could be relegated to the

status of commoditized product providers.

A Digital ‘Perfect Storm’

The combined forces of advanced technology, high speed internet, increasing pen-
etration of smartphones and the increasing popularity and functionality of appli-
cation program interfaces (APIs) has created a ‘perfect storm’ for innovation. The
increasing affordability of each of these components has further strengthened the
storm.
In an excellent report, ‘Open Banking: How to Flourish in an Uncertain Future,’

Deloitte states, “Technologies such as ‘Infrastructure-as-a-Service’ (IaaS), ‘Plat-
form-as-a-Service’ (PaaS) and ‘Software-as-a-Service’ (SaaS) have allowed new
tech-enabled entrants to enter the retail banking sector with lower IT overheads.
They have also allowed them to respond more flexibly to changing market needs.”
Finally, as Deloitte points out, none of these capabilities would make a difference
if the consumer didn’t want change. As numerous research reports have pointed
out, however, there is a significant pent up demand for improved digital banking
experiences from the increasingly tech savvy consumer base that has already em-
braced innovations in other industries. This latent demand also extends to small
businesses and specific product lines like payments and wealth management.
Future Evolution of Banking

There is a growing consensus among industry observers that, while the initial trans-
formation of the banking industry may be an expansion of providers offering new
alternatives to existing banking services, the ultimate transformation may be far
greater. In the future, the banking ecosystem may expand far beyond just financial
services, or financial services may become relegated to being just a small compo-
nent of a broader non-banking ecosystem.
Deloitte believes the banking model of the future will be some form of market-
place banking. “In marketplace banking, the traditional banking business model
is transformed into a data-intensive, platform-based marketplace, where several
financial services providers continually compete to offer customers tailored,
good-value products,” states the report. “As a result, traditional bank services
are augmented by a variety of offerings through an ecosystem of providers.”

CHART 18:
THE FUTURE OF MARKETPLACE BANKING
Source: Deloitte © December 2017 Digital Banking Report
Beyond traditional banking services, the new ecosystem would allow banks to be-
come the ‘hub’ for other, non-financial ancillary services provided by other banks
or organizations in other industries. In this scenario, bank APIs would centralize
an array of lifestage services, reducing friction and improving the customer expe-
rience.
Instead of disjointed components of a lifestage process like a home or car pur-

chase, starting a small business, or having a child, all involved players (banks,
insurance, retail, governmental units, agents, etc.) could be brought together in a
holistic marketplace.

Data is the Fuel for the Future

The future is not just about selecting the most desired strategic option, it is about
preparing for various market alternatives. “The ability to exploit and use customer
data in innovative and more individually tailored propositions will be paramount,”
according to Deloitte. “Banks will also need to engender a shift in culture towards
a ‘fail fast and learn quickly’ mentality and an agile way of working that encourag-
es experimentation.”
Banks must invest in advanced data collection and analytics, going far beyond
creating internal reports, to creating great customer experiences. The objective
will be to use cognitive analytics to drive cognitive engagement – providing a view
of potential future outcomes as opposed to simply past occurrences. Beyond
using just data within the organization’s firewalls, the future will require using vast
amounts of external data (social, locational, risk, etc.) to improve decision making
and engagement.
“As PSDII enters in force at the beginning of the year, some

truths will be revealed about the effects of such imprecise regu-
lation, about the misplaced expectations of some start-ups, and
about the real open banking strategy of the European banks.
Over the year, I expect the bumps in the road to open banking to
get smoother as new players learn to work together and deliv-
er banking services in new ways. The rest of the world will be
watching and learning from this.”
– Andra Sonea, Fellow, Anthemis Group
“The era of Open Banking is upon us. Banks have moved beyond exploration with
Fintech companies and moved towards established partnerships. This evolution
will continue in 2018 as consumers move closer to having the power to completely
customize their banking relationship.”
– Matt Wilcox , SVP, Marketing Strategy and Innovation at Fiserv
“The rise of open banking will force banks to decide whether they want to be the
interface (in control of the relationship), or the pipe (providing third party ecosys-
tems) with digitally savvy product and systems. Big internet players will test the
water and offer unbundled financial services to support their core business (eg
payment services, lending).”
– Paolo Barbesino, SVP, Head of Digital, CEE Retail, UniCredit

“I believe 2018 will be a year of demystifying open banking driven

by API, when many institutions will start seeing it as a new chan-
nel of customer acquisition and engagement, rather than a threat
that will diminish their business.”
– Sonia Wedrychowicz, Managing Director, Consumer Bank Technology, DBS Bank
“I’m looking forward to U.S. specific “lessons learned” from the PSD2 enforce-
ment in the UK. As usual, we will bastardize the guidelines to fit our unique
needs. But open banking is coming whether we like it or not.”
– Sam Maule, Managing Partner, North America at 11:FS
“2018 will be the point of no return due to PSD2. This will place banks and
fintech services into equal positions, thus taking user experience design to the
forefront as the main edge of competition.”
– Alex Kreger, CEO of UX Design Agency
“European MiFID2 and PSD2 will realize internationally the need and opportu-
nities of digital wealth management, accelerating all B2B and B2C wealthtech
trends.”
– Paolo Sironi, FinTech Thought Leader/Author IBM Watson, Financial Services
“As the fintech ecosystem gets more complex and end users
look for more self-service tools, the ‘platformification’ of digital
banking will be a trend that will bring consumer, business, and
employee under one single solution to save money and lower
the maintenance/complexity of managing disparate systems.”
– Tom Shen, CEO of Malauzai Software, Inc.
“We’ll reach peak API excitement, but despite the investment, there won’t be
many success stories from banks opening their APIs just yet as they realize its
not a case of ‘build it and they will come!’.”
– James Haycock, Managing Director at Adaptive Lab
“Open Banking will be a massive game changer. The best hope is that banks be-
come the next financial platform – finance 2.0 – offering consumers more choice
and competition. Worst case scenario is that the big tech giants (Google, Face-
book, Apple, Amazon, etc.) will leverage their data and open platform to dominate
the market.”
– Elizabeth Lumley, Global FinTech Commentator and Advisory Board Member

“PSD2 and open banking represents a huge opportunity for change and innova-
tion in the coming year. Benefits will come to organizations with a PSD2-ready API
and regulatory permissions to open a marketplace which collects and connects
other financial services providers, all within the banking app.”
– Anne Boden, CEO of Starling Bank
“The frontlines in the battle for the new customer will shift in
2018. Tomorrow’s conversational commerce, AI, and big data will
transform the Facebooks, Amazons, Googles, and Apples of the
world into the key gateways for new customers. The only way to
compete will be through real customer insights from personas/
journeys and integration requiring API ready infrastructure.”
– Craig McLaughlin, President of Extractable
“The availability of APIs is a game changer for the industry as FIs gain the ability
to decouple from inflexible vendor development processes and take more control
over customer experience.”
– Alpine Jennings, Director, Deposits at State Farm Bank
“Open banking is the dawn of the next wave of banking like we haven’t known
before. New entrants will be able to access interesting new sources of data and
make payments, and old incumbents will be pushed to embrace the next wave of
digital ... with the result being intelligent digital services either as an end to end
experience or as part of a distributed ecosystem. This is the year that David and
Goliath will win, but which one wins most is going to be the most interesting thing
to see. Its way too close to call.”
– David Brear, CEO, at 11:FS

Digital Banks in a Platform Economy:

What to expect in 2018
Article by: Julien Courbe and Aaron Schwartz, PwC
sumer’s daily life. In this platform

economy, convenience, personaliza-
tion, speed, and scale have proven
to underpin value creation.
The risk for banks is that the mas-

sive shift in value toward platforms
is acting to diminish aspects of the
financial ser vices value chain. Much
of the consumer data that banks
collect, for example, is transaction-
al and may provide only a partial or
incomplete view of the consumer.
This makes it more difficult to pro-
Julien Courbe vide ever more personalized and Aaron Schwartz
PwC Financial Services timely financial ser vices. Head of Fintech Research
Advisory Leader for PwC
The evolution in banking should
A leading social media company involve the understanding and re- —product development, distribu-
sees its average user spend about lationship of a wide scope of data tion, and sales and marketing—all
50 minutes ever y day on its plat- in the context of each consumer’s aimed at customer acquisition. Plat-
form. This compares to the roughly journey. That means a mortgage form-based models, however, are
54 seconds per day that a leading should not be viewed as a point-in- two-way. Customer acquisition is of-
global retail bank interacts with its time transactional ser vice but as a ten just the starting point, and data
typical customer, which arguably life event that encapsulates many from platform/consumer interaction
best characterizes engagement ver- other financial and lifestyle events and third-party participation are
sus transaction. that a bank should address. then used to assess and address
consumer behavior and changing de-
Beyond the sheer difference in time, All is not lost for traditional banks, mand to continuously refine product
it illustrates the challenge banks however. They have inherent advan- development and distribution.
face in a digital world. Not only do tages that can be exposed, albeit
they compete with rival banks, they slightly differently, in a digital-first As digital banking continues to
compete for consumer time, en- world. There is little doubt that evolve, strategies will need to con-
gagement, and the troves of valu- digital banks will become main- sider this two-way continuous value
able data that come with it. stream—look no further than recent creation and data collection. After
launches of digital-only brands by all, credit decisioning, wealth man-
As banks increasingly reposition to large incumbent banks in the US agement, and lending methods are
a digital environment, they face the and the traction of challenger banks data problems—and are increasing-
realities of today’s platform econo- in the UK—and we expect engage- ly not one-size-fits-all problems.
my. As we exit 2017, seven of the ment and open banking to be a ma-
ten largest global market cap com- jor part of this shift in 2018. To address this, banks need to tran-
panies are platforms, and all now sition from a point-in-time transac-
offer financial ser vices. These com- tional data mindset to an all-encom-
panies are highly consumer-centric, A Shift from Transaction to
target specific customer segments Engagement
with timely product offerings, and The traditional bank business mod-
occupy a growing portion of a con- el relies on one-way value creation

passing engagement mindset. This Digital banking revolves not just Finally, one major reason why large
will surely involve the use of artifi- around the core financial ser vice technology platform companies
cial intelligence, machine learning, provided, but also the range of ser- have entered financial ser vices is
and advanced analytics, but these vices and the manner and ease at to provide convenience to their cus-
technologies all first rely on the right which they are provided. Addressing tomers (e.g., providing payments
sets of data. the intuitive experience of a digital or credit directly on the platform
bank app is what most banks focus or in-app). It is not just the range
This shift to a two-way model to on today. In 2018, expect them to of ser vices, but also penetration. In
rapidly iterate and personalize prod- expand their focus to a broader set certain countries, notably China but
ucts based on consumer data may of ser vices to more broadly engage also India, tech platforms not only
be one of the larger adjustments a consumers and increase the appeal handle a wide variety of financial
bank makes in its journey to digital, of a digital bank. ser vices, but also have established
but it is a critical aspect to move significant share.
to an engagement approach in order To remain relevant in this digital
to avoid being relegated to simply a environment, banks are likely to ex- Banks that embrace consumer en-
transaction facilitator. pand beyond their traditional branch gagement and open models will be
walls. Due to one-off data sharing well positioned to provide a breadth
Banking Beyond the Branch arrangements, select banks moving of personalized financial ser vices
Walls for ward with open source approach- to better meet changing consumer
Platform economics also rely on es, or an expanding set of public ap- demand trends. And open models
open models. Financial ser vices plication programming inter faces, go a long way in the context of pro-
firms that begin to open their mod- the sur face area of how financial viding convenience, personalization,
els and make data available to third ser vices are delivered is growing. speed, and scale that are expected
parties may find unforeseen syner- Banks will play a major role in this by today’s digital-first consumer.
gies with partners, cost efficiently evolution and should increasingly
address niche markets or previously take advantage to deliver a broad-
unaddressed customer segments, er set of ser vices — which may in-
or develop new consumer-centric clude third-party ser vices — to their
digital experiences and ser vices. consumer base.
Julien Courbe Aaron Schwartz

Julien Courbe is the lead Partner Aaron Schwartz is the financial
for the Financial Services Ad- technology and emerging tech
visory practice at PwC, cover- research professional at PwC.
ing banking, capital markets, Experienced sell-side equity re-
insurance and asset & wealth search analyst with coverage of
management companies. enterprise software, cybersecuri-
ty, big data, cloud, and FinTech.
https://www.linkedin.com/in/
juliencourbe/ https://www.linkedin.com/in/
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Building Fintech Partnerships
In the past, many traditional banking organizations looked at fintech

start-ups as more of a nuisance than a threat. Today, many are
viewing these non-traditional providers as a threat as well as either a
partner or potential acquisition.
Keeping pace with the changing needs financial ser vices firms are planning to
of today’s financial ser vices customer acquire fintech startups over the same
is more difficult than ever, with new period.
technologies, personalized product
offerings and increasing competition Mainstream financial institutions
gaining momentum. In its latest Global are rapidly embracing the disruptive
Fintech Report, PwC found that 88% nature of fintech and forging partner-
of legacy banking organizations fear ships in efforts to sharpen operational
losing revenue to financial technology efficiency and respond to customer
companies in areas such as pay- demands for more innovative ser vices.
ments, money transfers and personal In fact, funding of fintech startups
loans. The amount of business at risk has increased at a compound annual
has grown to an estimated 24% of growth rate (CAGR) of 41% over the
revenues. last four years, with over US$40 billion
in cumulative investment, according to
In response to this threat, 82% of tra- PwC’s DeNovo platform.
ditional financial organizations stated
a plan to increase collaboration with
fintech companies in the next three
to five years. Similarly, almost 50% of

CHART 19:
ACTIVITIES CONSUMERS ARE ALREADY
CONDUCTING WITH FINTECH FIRMS
(INCUMBENT BELIEFS)
Payments
84%
Fund transfer
68%
Personal finance
60%
$ Personal loans
56%
Traditional deposits/savings accounts
49%
Insurance
38%
Wealth management
38%
Source: PwC © December 2017 Digital Banking Report
Collaborating for a Better Customer Experience

Bottom line, fintech firms and financial innovation in general are changing the fi-
nancial services ecosystem, redrawing the lines of the financial services industry
and the transforming the ways consumers and businesses manage their finances.
Fintech startups don’t just need capital, they need customers. At the same time,
incumbents need new approaches to drive change and deliver innovation.
Fintech startups realize that it takes more than a great solution to attract a
scalable customer base. To reach beyond early adopters and the tech-savvy takes
massive amounts of capital for promotion and product support. Partnering with an
established banking organization who will support the expansion of users among
their client base seems like a logical means to an end.
Alternatively, legacy banking organizations, struggle to keep up with consumer

expectations. Size, organizational structure (silos) and even traditional leadership
styles hamper the ability to deliver the new digital solutions consumers receive

from other industries. Partnering with a fintech startup alleviates some of these
issues, allowing the established organization an opportunity to keep pace with
marketplace demands.
Fintech collaboration is not about grabbing for the ‘next shiny object’ — it’s about
intuitive product design, ease of use, and 24/7 accessibility. Embracing fintech
is as much about different ways of working and problem-solving as it is about
deploying new technology.
Partnering with fintech companies is up from 32% in 2016 to 45% this year on
average, but large discrepancies exist between different countries. For instance,
financial institutions in Germany were the most likely to currently have fintech
partnerships (70%), with only 14% of organizations in South Korea having this
form of collaboration. (53% of US banks had fintech partnerships with 43% of UK
banks having the same).
Focus on New Technologies

The ‘fintech advantage’ has usually been driven by the ability to leverage new tech-
nologies and delivery channels. Using advanced analytics, big data and real-time
digital delivery, fintech firms have found an Achilles heel in the traditional banking
process. To succeed, incumbent firms must concentrate on these same technolo-
gies to provide a better consumer experience.
Most traditional financial institutions are concentrating on updating their legacy

systems, with a strong focus on data analytics, mobile technology and the begin-
nings of an artificial intelligence (AI) strategy. In a high stakes game of leap frog,
while most incumbents are focusing on consolidating and managing data and to
offer personalized digital experiences, fintech firms have moved to the next level,
focusing on technologies such as blockchain, advanced AI strategies and biomet-
ric authentication.

CHART 20:
ANALYTICS, MOBILE AND AI WILL GET
INVESTMENT ATTENTION IN NEXT YEAR
Data analytics
74%
Mobile
51%
Artificial intelligence
34%
Cyber-security
32%
Robotics process automation
30%
Biometrics and identity management
21%
Distributed ledger technologies (blockchain)
20%
Public cloud infrastructure
14%
Building a Strategy for the Future

Incumbent organizations need to revisit long-standing assumptions regarding com-
petitive strengths, efficiency and effectiveness of current (and future) strategies,
consumer expectations of their organization, the likely competitive landscape,
and how these might be changing. These same organizations must become much
more familiar with new digital technologies and the potential impact on traditional
business models.
It will be close to impossible for incumbent financial organizations to ‘go it alone’

given the speed of technological change and customer expectations. Even with
the benefits of fintech partnering or acquisition, there are still challenges with
legacy IT architecture, operational silos and an outdated leadership culture. To
succeed, organizations will need to move quickly to embrace a future that will be
significantly different than the past.

“Vendors that create marketplaces to aggregate/integrate enter-

prise banking apps and tools for banks and credit unions – will
gain traction in 2018. FIs will more easily integrate and deploy
best-of-breed solutions, reduce their reliance on a single, large
core provider, differentiate their offering by offering a wider
range of choices to their customers, and find effective and effi-
cient approaches to core transformation.”
– Ron Shevlin, Director of Research at Cornerstone Advisors, Inc.
“Banks will put pressure on core providers to become more open and accom-
modating, resulting in the core’s increasing appetite to acquire fintech, digital
banking and data companies. The cores will begin proving they can support the
changing needs of the banking industry.”
– Bryan Clagett, CMO at Geezeo
“Collaboration between fintech startups and financial services organizations will

heat up further, fueled by regulatory changes such as PSD2, and by industry
groups like TruSight. The challenges of fintech firms’ scaling up and the FIs’ in-
novation are addressed by partnerships. Regulatory changes should also aide in
making collaborations easier.”
– Alex Jimenez, VP and Senior Strategist at Zions Bancorporation
“Banks will be more open to the idea of partnering with fintech firms, incumbent
vendors, and even competitors, and they’ll actually begin to enter into partner-
ships. Like any new skill, partnering will take practice, but those financial institu-
tions that do it well will have a significant advantage over the competition, both
traditional and new.”
– Dan Latimore, SVP, Banking at Celent
“In 2018, we will see more financial institutions working together

on innovation projects. They are finally warming up to the idea that
they don’t have to invent everything in house, and that the network
effect can be very valuable for certain efforts, as we saw with Zelle
in 2017. Professionally managed consortia will allow more institu-
tions to make up lost ground on the innovation leaders.”
– JP Nicols, Managing Director, Fintech Forge & Chairman, Next Money Americas

“More core providers will begin to embrace the API, like FIS have done with Code
Connect. This will create healthy tension that exist between data aggregators,
digital banking providers, and nimble startups who all want a financial institu-
tion’s business. The net result will be cheaper and faster collaboration between a
financial institution and their chosen technology partners.”
– Keith Armstrong, Co-Founder of Abe AI Inc.
“The banking industry will follow the path of the computing industry, whereby the
most successful players morphed from a build model to a buy model. The most
successful banks and credit unions will learn to better position and build their
brands and enable a new era of banking by harnessing unlimited innovation from
fintech providers.”
– Don MacDonald, CMO at MX
“Fintech startups merging with more successful fintech players,

or hoping to be bought by incumbents, will be one of the biggest
trends in 2018. AI and machine learning will play an increasingly
key role for the startups as well as for the incumbents differenti-
ating the winners from the losers in an increasingly competitive
environment.”
– Spiros Margaris, Founder of Margaris Advisory
“After years of aggressive cost-cutting due to the aftermath of the 2008 financial
crisis, banks will look to partner with bank technology and fintech providers that
provide solutions that can directly impact revenue. Digital lending and account
origination will be the early areas of focus.”
– David Gerbino, Principal, @dmgerbino consulting
“More banks will see fintech startups as an “enabler” rather than a “disruptor”
and there will be more collaborative initiatives between banks and startups. More
banks will focus on digital transformation as a key strategic agenda, rather than
focusing on digital innovation in a limited emerging technology area.”
– Makoto Shibata, Head of Global Innovation at Bank of Tokyo-Mitsubishi UFJ
“Big retail players will realize they don’t have the technology or the reach to cap-
ture data previously only available through financial institutions or third parties,
and will collaborate more with startups. It will be the year of Fintech for people.”
– Matteo Rizzi, Co-Founder of FinTechStage Limited
“The innovation function grows up and moves from the Lab to the Factory. Bank IT
teams will meld with business and deliver new solutions by using ideation, design
development and business modeling into a complete ability to deliver customer
ready solutions. This is the end of innovation islands and will be the only way to
deliver true financial services innovation.”
– Dion F. Lisle, VP, Head of Fintech at CapGemini

“While there has been a perceived slow down in venture capital

fintech investment, startup activity, corporate partnership, in-
vestment and experimentation with smaller technology players
will not slow down in 2018. Many banks will need sherpas and
interpreters to bring these activities inside the bank to change
the culture from within.”
– Bradley Leimer, Managing Director and Head of Fintech Strategy at Explorer
Advisory and Capital
“2018 will be a year of stretching limits for fintech partnerships. Banks want
bigger impact from fintech technologies and bigger/faster results, and they will
invest heavily in technologies and tools that can create a human-like experience
across all channels. This may also be the year the regtech space finally gets the
attention it deserves.”
– Devie Mohan, Co-Founder and CEO of Burnmark
“2018 will see deep integration of AI/ML into fintech and financial processes. Fintech
as an industry will mature significantly, making 2018 the year when fintech will leave
puberty behind.”
– Alex Nechoroskovas, Founder of Fintech Summary

Upgrading Digital Payments
New technologies, players and consumer expectations are changing

the payments marketplace more than ever. As the payments
ecosystem transforms, traditional banks and credit unions must
reassess their role, and find value-added solutions for the future.
In no other area of banking is there Alternatively, research shows that

greater evidence of the convergence digital wallets and P2P are poised for
of customer insight, digital technol- a significant upsurge. According to the
ogy and advanced analytics than in U.S. Bank Cash Behavior Survey, 47% of
the global payments ecosystem. Still, consumers sur veyed say they prefer
most industr y obser vers would agree the use of digital payment apps versus
that the acceptance and use of digital cash (45%). In addition, a study from
payments and mobile wallets has Juniper Research found more than
been less than expected. half (53%) of global transactions at
POS will be contactless within 5 years,
In August, Goldman Sachs stated compared to just 15% this year.
that digital wallet adoption had been
“underwhelming to date by nearly every The need to expand and improve prod-
objective standard.” The analyst stated uct offerings, respond to competitive
that while Apple Pay was the dominant pressures and enhance security has
digital wallet leader, accounting for 90% resulted in banks investing heavily to
of all contactless payments originating deliver new and enhanced payments
from a smartphone in the U.S., it was capabilities. Across all global regions
still struggling to gain real traction. and all sizes of organizations, banks

are expected to grow their investment in back office systems and improved prod-
ucts in 2018.
Despite increased adoption of digital payments, cash remains a primar y form

of payment for many, especially for low-value transactions and by certain demo-
graphic groups. Attributes of cash contributing to continued use include speed,
universal acceptance, anonymity, lack of fees, etc. Some emerging markets also
still lack a modern payments infrastructure while certain cultures don’t have
trust in the banking system. In other words, the reports of the death of cash are
still exaggerated.
The proliferation of new technologies will dramatically change both security and
regulator y components, while the increase of data from these transactions will
impact the value propositions possible. The World Payments Report 2017 (WPR)
released by Capgemini and BNP Paribas found that regulations, competition,
customer expectations and emerging technologies were thought to be the prima-
r y drivers of change in the future.
Fintech executives and traditional bankers differed in their view of what would
impact the marketplace the most. Not surprisingly, the responses from fintech
firms revolved around the customer experience and technology, while tradition-
al banks thought regulations and non-traditional firms would have the greatest
impact.

CHART 21:
DRIVERS CAUSING STRUCTURAL CHANGES IN
PAYMENTS
65%
Regulatory initiatives
274 35%
Emergence of fintechs leading 60%

to disintermediation of banks 35%
Customer expectations 40%

for value added services 57%
Emergence of enabling 40%

technologies in payments 57%
Expectation of increased 30%

efficiency in transaction handling 30%
Banks challenged in current business 25%

models (per transaction fee, MIF) 39%
Banks adopting new distribution 20%

models (network effects) from
open digital platforms 22%
20% Banks’ view

Fragmentation of the
payments value chain 22% Fintechs’ view
Uncertainty in future 5%
business models of banks 4%
Percentage of Respondents (%)
Source: Capgemini/BNP Paribas WPR 2017 © December 2017 Digital Banking Report

The integration of customer analytics, improved fraud management, dynamic

wallet solutions and other value-added services will have a positive impact on
both the consumer and the merchant. It is expected that ongoing improvements
in biometrics and secure payments will become mandatory in the future, while
integration real-time financial management solutions will become commonplace.
Finally, as fintech firms continue to bypass traditional value chain components,

traditional financial services organizations will need to determine if they should
partner with, buy or ignore these new competitors. Given that most of the fintech
activity in the payments space has targeted the most lucrative components of the
payment value chain, significant decisions are necessary.
This urgency becomes apparent when taken in context of the potential for new
payment solutions made possible by open APIs, blockchain, AI and big data. With
the expansion of solutions beyond traditional banking services and the aggrega-
tion of data for added consumer value, there is significant potential for growth (or
loss) of market share.
Challenges of the New Payments Ecosystem

The opportunities of the new digital payment ecosystem come with risks. From
cybersecurity and privacy to the impact of legacy technology and new competitors,
it is far from clear sailing for organizations wanting to be a player in the future
payments marketplace.

WRPR found that banking executives were most concerned about cybersecurity
(65%) and data privacy (55%), with a lack of clarity around regulations also being
a concern (35%). Again, there was a significant disparity between the responses
from traditional bankers and fintech players.
CHART 22:
PAYMENT CHALLENGES FACED BY BANKING
ORGANIZATIONS
65%
Cybersecurity concerns
22%
55%
Data privacy concerns
30%
Lack of clarity on 35%

regulatory specifications 44%
Complexity to 35%
move to real time 35%
Organization structure is not optimally 30%

aligned to adapt to new developments
(centralization vs localization) 48%
Lack of agility in operations 30%

to adopt to new ways of working 65%
Challenges related to collaboration 25%

with suppliers/customers/supply chain
providers 26%
Future uncertainty 20% Banks’ view

due to market evolution 4% Fintechs’ view
15%
Lack of established business case
9%
Percentage of Respondents (%)
Source: Capgemini/BNP Paribas WPR 2017 © December 2017 Digital Banking Report

Investment in Payments Technology

When asked how the investment in payments would change over the next couple
of years, research by Digital Banking Report entitled, Digital Payments and Mobile
Wallets, found that only 2% of respondents expected to reduce their investment,
while 89% stated they would be increasing their investment. Of these firms, 41%
believed their increase in investment would be in excess of 10%.
CHART 23:
ANNUAL INVESTMENT IN
PAYMENTS TECHNOLOGIES
Q: How will your organization’s annual investment in payments
technologies change over the next couple of years?
47%
41%
9%
2% 0%
Increase Up to10% No change Up to 5% Decrease
10% + increase decrease 5% +
When asked to prioritize the areas where payment investments would be made,
the number one priority was to improve the customer experience (4.56 on a
5-point scale). For most organizations, this investment equates to reducing pay-
ment friction and improving the speed of clearing and settlement (which are also
listed separately).
Most organizations hope that by delivering an enhanced customer experience,

new relationships and increased use of payment products will occur. The research
found that increase customer use and increase sign-up were the second and
third highest priorities with a 4.39 and 4.33 score on a 5-scale basis.
Aligned with the importance of payments within an organization, investment in

the development of current and future payment products reflects the potential
of P2P payments and mobile wallets. When our global survey participants were
asked about what products they would invest in, P2P payments (4.12 on a 5-point
scale), debit cards (3.95) and mobile wallets (3.93) were the highest ranked prod-
ucts. Only prepaid cards were a minor priority for those who responded.

Payments Preparedness
When asked about the benefits of new payment technologies organizations cite the
heightened administrative efficiency as the advantage that appeals to them most.
In addition, they value other benefits such as reduced processing costs, end-to-end
procurement transparency, the ability to automate processes, enhanced analytics
and faster processing speed.
When we asked Digital Banking Report survey participants about real-time payments,
there was almost uniform agreement that real-time payments were a great opportu-
nity for the banking industry (4.34 on a 5-point scale). There was also strong agree-
ment that there will be an investment in real-time payments.
There was lower agreement, albeit still positive, that real-time payments will pro-
vide additional revenue streams (3.77 on a 5-point scale) and that organizations
were prepared for this industry change (3.5 on a 5-point scale).
CHART 24:
REAL-TIME PAYMENTS
Please provide your level of agreement with the following statements:
Number results are the Weighted Average.
Real-time payments
are a great opportunity 4.34
for banking.
Our firm is committed to

investing in real-time payments. 4.11
Real-time payments will

provide new revenue streams. 3.77
Our firm is prepared to

offer real-time payments. 3.50

When asked about the opportunity and preparedness for P2P payments, orga-
nizations were not as positive about the opportunity, investment in or revenue
potential for P2P payments compared to real-time payments. On the other hand,
organizations felt they were more prepared to offer P2P capabilities than real-time
payments. This is not entirely surprising, given that solutions have been offered
by 3rd party vendors for some time.
CHART 25:
P2P PAYMENTS
Please provide your level of agreement with the following statements.
Number results are the Weighted Average.
P2P payments is a great

opportunity for banking. 4.12
Our firm is committed to

investing in P2P payments. 3.85
P2P payments will provide

new revenue streams. 3.50
Our firm is prepared to

offer P2P payments. 3.70
The Future of Payments

Consumers, merchants, issuers and financial institutions are all completely
rethinking the future of payments. As with most financial services transformation
occurring today, the focus is on speed, ease, digitalization and security. At the
same time, many organizations are considering the potential to bring all compo-
nents of e-commerce into a universal ecosystem that makes life easier.
The challenge is — who will be prepared to be the provider(s) in the future? What
organizations will make the investment and commitment necessary to provide
seamless and secure contextual payments that use AI to make recommendations
on purchases and the determine the best way to pay given a consumer’s personal
financial situation?
The winners will be determined quicker than most realize as consumers’ expec-
tations grow exponentially. Some organizations will be left on the sidelines, while
others may play a prominent part in a consumer’s daily life. What is clear is that
most traditional organizations are playing catch-up.

“With the fast-paced development of applications, technology

and recent upgrades to Apply Pay, we can expect mobile pay-
ments to continue to grow at a rapid pace. With the surge of
cyber security data breaches on the rise, it will be essential that
these mobile payment applications and systems be put through
vigorous security tests performed by third-party auditors.”
– Michael Fisher, Full-time Analyst at TechCPU
“Adoption of alternative payment technologies will expand exponentially as con-

sumers ditch cash for the convenience and security of emerging payment meth-
ods including contactless payments, digital wallets and biometric verification.”
– Todd Linden, CEO, Paysafe Payment Processing North America, Paysafe Group
“With most larger U.S. banks utilizing the Zelle platform, we will start to see a tre-
mendous acceleration to digital payments, especially P2P. The benefit of having a
common set of rails across the majority of the largest banks in the U.S., allowing
seamless payments to the majority of U.S. banking clients, cannot be over-em-
phasized. Watch out cash!”
– James Anthos, SVP and Director of Strategic Planning at BB&T
“PayPal and Venmo will see major competition with the continued roll out of Zelle
and the move to (near) real-time payments transfer. All solutions will likely contin-
ue to grow, but it will be interesting to see if Zelle is able to penetrate into known
Venmo demographics.”
– Chris Fleisher, Director, Event Strategy at Fiserv
“2018 will see the consumer adoption of P2P payments accelerate to the point
that this way of payment becomes a serious alternative to existing payment meth-
ods such as cash and cards.”
– Ron van Wezel, Senior Analyst at Aite Group
“2018 will see the first deployments of real-time retail payments

platforms powered exclusively by mobile phone access. Driven
by financial inclusion, these super-scalable and ultra low-cost
platforms will connect mobile wallets to institutional payers
and merchants, as well as traditional bank accounts. These
platforms will also enable easy access to payments for the new
applications of the future, such as the solar battery leasing com-
panies, transport companies and others.”
– Kosta Peric, Deputy Director, Financial Services at Bill & Melinda Gates
Foundation

Digital Payments and Mobile Wallet Report

The report, Digital Payments and Mobile Wallets,
sponsored by Fiserv, provides insight into the ISSUE 252// NOVEMBER 2017
strategies, tactics, trends and level of deploy-

ment of advanced payment solutions at financial
institutions globally. Beyond a benchmark study,
there is analysis of payment technologies such
as real-time payments, P2P, open APIs, mobile
wallets and wearables as well as close to a
dozen case studies from leading organizations
worldwide.
The report is based on a survey of close to 250

financial services executives worldwide and in- Digital
cludes 80 pages of analysis and 42 charts. Payments and
Mobile Wallets
You can download an executive summary of this
Digital Banking Report or purchase the report by
clicking here.

Navigating Compliance and Regulations
The combination of regulators, investors, customers, and new

competitors has financial institutions feeling the pressure to optimize
their infrastructures in ways that address the ever-growing scrutiny of
compliance. Regulatory compliance is not only complicated but costly.
Similar to what we saw in 2017, most average financial institutions have 10

banks and credit unions worldwide to 15 per cent of their staff dedicated
are continuing to do business under a to this area.
cloud of regulatory uncertainty that is
expected to a challenge for the fore- “Banks are switching to be really
seeable future. Even though lawmakers data-driven companies — that will be
and regulators aren’t expected to make one of the biggest drivers for the indus-
many definitive changes, most financial try in the next few years and regtech
institutions continue to do their best to will be part of that,” said Álvaro Martín,
meet risk and compliance parameters chief economist for digital regulation
and supervisory expectations. at BBVA. While the high costs are a
burden on large institutions, for smaller
Big banks, such as HSBC, Deutsche entities it is a threat to sustainability
Bank and JPMorgan, spend well … they don’t have the economies of
over $1B a year each on regulator y scale to spread the costs.
compliance and controls. Spanish
bank BBVA recently estimated that on

CHART 26: NEWLY PUBLISHED REGULATIONS

HAVE TRIPLED IN THE PAST 5 YEARS
60 75 100 150 200
Number of regulator y changes per day
51,600
Number of regulator y changes per year
+37% 40,600
27,000
17,800
14,200
2011 2012 2013 2014 2015

Source: Thomas Reuters, Financial Times © December 2017 Digital Banking Report
Note: Data coves regulatory changes worldwide.
Since most institutions realize that they don’t have the ability to wait to see how
things will eventually end up, many banking organizations are making progress,
trying to keep in alignment with what is anticipated from a risk and business
perspective. As one banker stated this past year, we are in a position to ‘beg for
forgiveness’ rather than ‘asking for permission.’
According to Deloitte, “Banking organizations need to keep moving forward as

planned, with deliberate linkage between regulatory strategy; business strategy;
and building infrastructure for governance, regulatory reporting, and risk manage-
ment that scales and is flexible. The good news is that many of the changes bank-
ing organizations are currently implementing make good sense from a business
perspective — not just a regulatory perspective — and are worth doing no matter
how the future unfolds.”
At the end of the day, regulations are aimed at retaining stability, safety and trust.
The key is for banks and credit unions to simplify compliance responses and al-
leviate non-compliance – instead channeling these funds elsewhere, such as man-
aging business processes or deploying digital technology across the business.
To reduce the risk of non-compliance, institutions are choosing integrated tech-

nology platforms that enable them to address multiple regulations efficiently and
effectively. The foundation of this process is data, digital technology and advanced
analytics that can reduce costs, improve accessibility and provide ongoing benefits.

“Regulatory and consumer attitudes to data protection, controls,

and data sharing are undergoing important changes in many
markets around the world, and especially in Europe (e.g. PSD2
and GDPR). Managing customer consent for data usage and
data sharing is rapidly becoming a critical skill for banks. While
regulatory compliance matters, forward-looking banks will be
thinking beyond compliance and seeking to turn customer con-
sent into a valuable asset.”
– Zilvinas Bareisis, Senior Analyst at Celent
“The complexities and nuances of data management, privacy and security will
come to a head for financial institutions and fintech. Both will need to assure
data platforms are designed around the principles of transparency and trust, as
governments’ role in oversight continues to evolve.”
– Bryan Clagett, CMO of Geezeo
“The most exciting activities in banking are happening in Asian markets, where
commerce and financial services are blending within new everyday customer
experiences and where government regulatory activities are encouraging and di-
rectly involved in innovation. The policies of the U.S. and Western Europe need to
more rapidly evolve or else the banking and technology centers of innovation will
continue to shift eastward.”
– Bradley Leimer, Managing Director and Head of Fintech Strategy at Explorer

Advisory and Capital
“I worry about FIs response to regulators’ review of sales practices in the wake of
Wells Fargo. Especially at a time when alternative service providers are expand-
ing. Banks can ill-afford an over-reaction here.”
–Alpine Jennings, Director, Deposits at State Farm Bank

Exploring Advanced Technologies
The scope and scale of technological change in the financial industry

is unprecedented. Will banks and credit unions be able to keep up?
Or will they fall even further behind?
As we look at the transformation of tries. In fact, while 67% of companies

the banking industr y, the ability to rated their Digital IQ as strong last
leverage and profit from new technol- year, only 52% gave themselves a high
ogies is at the core of future growth rating in the most recent period (an
and sur vival. The problem is, the all-time low). Why does this matter?
digitization of banking is happening Because there is a direct correlation
at a faster pace than most organiza- between Digital IQ and financial per for-
tions can handle. In sync with these mance, according to PwC.
changes, consumer expectations are
increasing as well, putting additional “Power ful new tools continue to crowd
pressures on financial executives to into the marketplace, even as organi-
deliver ser vices in alignment with what zations struggle to digest the founda-
is by the most progressive eCom- tional technologies like cloud, mobile,
merce giants like Google, Amazon, and analytics on which next-generation
Facebook and Apple. innovations depend,” states PwC in
the 2017 Global Digital IQ Survey. “At
In 2007, PwC first measured an orga- the same time, “digital” has evolved
nization’s ability to harness and profit from a synonym for IT to a more ex-
from technology. This measurement – pansive approach to technology and
Digital IQ – has actually declined over its impact on customers, culture, and
the past 10 years across all indus- business outcomes, raising the com-

plexity and stakes of the game while it is in progress—and diminishing the

confidence of the players along the way.”
Part of the challenge with keeping up with the digital revolution is that many
of the tasks related to digital transformation, including investment prioriti-
zation, innovation and product development reside only at the CEO and CIO
levels of the organization instead of across all senior executives. This may
explain why the top benefits cited from digital initiatives were around revenue
growth, increasing profits and cost savings as opposed to creating a better
customer experience. Interestingly, the goal of creating a better customer
experience declined from 25% to only 10% over the past year.
CHART 27:
WHAT IS THE VALUE EXPECTED FROM DIGITAL
TECHNOLOGY INVESTMENTS?
57%
45%
2015
2016
25%
12% 12% 10% 5%

4% 2%
7%
Grow Increase Achieve cost Create better Innovate our
revenue profits savings customer products
experiences

Another challenge is that most organizations recognize that there is a significant

skills gap that puts transformation efforts at risk. Organizations say skills in their
organization lag across a range of highly important areas, including cybersecurity
and privacy, business development of new technologies, and, yes, user experi-
ence and human-centered design. Worse, skill levels have declined since our last
survey, even as the demands of digital keep advancing.
CHART 28: WHAT ARE THE OBSTACLES TO

DIGITAL TRANSFORMATION?
22% 21%
24%
37% 41%
21%
58%
39% 37%
Lack of properly Lack of integration Inflexible or

skilled teams of new and existing slow processes
technologies & data
19% 12%
Existing barrier
23%
38% 64% Emerging barrier
Not a barrier
42%
Outdated Lack of
technologies collaboration between
IT & business
A New Generation of Technologies

At a time when most organizations are still playing catch-up, a new wave of digital
technology has the potential to change the way organizations deliver banking
services even further. These new technologies include artificial intelligence (AI),
the internet of things (IoT), blockchain, open banking platforms with application
program interfaces (APIs) and robotic process automation (RPA).
With the potential to increase efficiency, decrease costs and enhance the cus-
tomer experience, these digital-enabled technologies will result in disruption of
the way people do their banking and potentially what organizations deliver these
services. We are already seeing organizations testing many of these digital tech-
nologies, hoping to win the battle to become the ‘bank of the future.’

As quickly as past technologies have become the norm, a new wave of emerging
technologies will combine digital technologies and the power of data to set new
standards. According to PwC, these ‘essential eight’ technologies include:
• The Internet of Things (IoT)
• Artificial Intelligence (AI)
• Robotics
• 3-D Printing
• Augmented Reality
• Virtual Reality
• Drones
• Blockchain
Obviously, the prioritization and investment in each of these technologies will vary
based on the industry, business model and strategic goals of each organization.
For instance, while the marketplace as a whole does not foresee investing much
in blockchain technology, the financial services industry ranks this as a high
priority.
That said, investment in emerging technologies as a percentage of overall tech-

nology investment has not increased since 2007 (across industries). In fact, the
share of the overall technology budget that is allocated to emerging technology is
only 17.8%, according to the PwC research.

CHART 29:
WHICH TECHNOLOGIES GET THE FOCUS
OF DIGITAL INVESTMENTS?
Internet of Things
73%
63%
Artificial Intelligence
54%
63%
Robotics
15%
31%
3-D Printing
12%
17%
Today
Augmented Reality
In three years
10%
24%
Virtual Reality
7%
15%
Drones
5%
14%
Blockchain
3%
11%

Especially for the financial services industry, it is imperative to think beyond indi-
vidual emerging technologies. With the advent of open banking APIs as a way to
bring external technologies and innovations directly to banking customers, and the
emergence of non-traditional banking ecosystems that may include non-banking
services, combinations of technologies will become the norm.
For instance, the use of customer data insights and advanced analytics may be
combined with IoT technologies to allow payments directly from smart home de-
vices. Likewise, the expanded use of conversational AI and VR devices may come
together, providing methods of banking interactions only imagined in sci-fi movies.
Being a leader in emerging technology is no longer a luxury only for the big players.
It is important for all financial organizations to make emerging technology a ‘core
competency,’ with engagement throughout the organization (not just the very top).
In addition, the focus of every implementation must be both internal and external
human experiences, as opposed to revenue, profit and cost savings.
“Artificial Intelligence is an ‘event horizon’ for financial services.

You just cannot speculate on what is beyond the introduction of
true AI in the financial sector. Why? Because the customers will
have robots too. How exactly will the bank’s robot go about sell-
ing a pension to my robot? My robot couldn’t care less about the
free pen, the nice advertisement on television or the reassuring
mahogany in the advisor’s office.”
– David Birch, Director of Innovation at Consult Hyperion
“The most exciting of technology trends, as it enables unprecedented speed

of innovation and requires a severe cultural change, is the DevOps evolution of
many banks. This may be the single most important change to banking in the
next few years.”
– Duena Blomstrom, Chief Growth Officer Temenos, Marketplace Temenos
“In 2018, chatbots will become mainstream and grow out of the bank-owned
channels (e.g., bank’s website, internet banking, mobile banking) and into the
conversational platforms customers use most often. These platforms include
messaging apps (e.g., Facebook Messenger, LINE, etc) and personal intelligent
assistants (e.g., Google Assistant, Amazon Alexa, etc.).”
– Danny Tang, Channel Transformation Leader, Global Banking at IBM

“I see 2018 as a year of wide application of AI-driven solutions

that will be mostly voice-driven, fast development of biometric
authentication with special focus on facial recognition and voice,
as well as a boom of commercial applications of blockchain,
especially in SME and trade finance areas.”
– Sonia Wedrychowicz, Managing Director, Consumer Bank Technology,
DBS Bank
“Virtual (VR), augmented (AR), and mixed reality (MR) will enable a 4th wave of
computing power via a spatial computing revolution that integrates disruptive
technologies such as sensors, Big Data, the cloud, AI, and wearables. Together
with other innovation accelerators – AI, robotics, Big Data, and wearables – AR/
VR/MR will drive efficiencies, transform established sectors, and create new busi-
ness opportunities.”
– Dennis Gada, Regional Head, Financial Services at Infosys

Competition with New Challengers
The challenger banking industry is one of the most fascinating

examples of digital empowerment within financial services, thanks
to its pace of innovation and the heavy focus on technology-driven
customer centricity.
The challenger banking marketplace is technology stack and cohesive digital

increasingly becoming crowded, bring- channels to drive that experience. This
ing with it opportunities and challenges also became a defining characteristic
for all players involved. In the 82-page of all challenger banks to follow, and
Digital Banking Report, The Challenger has evolved to become a necessity in
Bank Battlefield, a broad array of new the space rather than a nice-to-have.
fintech players were evaluated, with the Having said that, challenger banks are
objective of understanding the trends, still innovating around the customer
must-have attributes and potential experience, with players like Monzo
paths of evolution in this space. We offering a one touch integration with bill
found that, despite the number of payments and Osper offering the ability
players, the rationale for getting into to turn off cards or set allowances for
business, underlying strategies and the week.
products offered varied widely.
Challenger banks, like other banks,
Early challenger banks like the aptly put customers first. However, for
branded US-based Simple and Moven them, digital technology is the primar y
or UK-based Atom, had a clear val- means of reaching the customer quick-
ue proposition centered around the ly and efficiently. Technology is the
customer experience, utilizing a simple prime driver of costs and revenues for

these banks, which is evident in the way they use authentication technologies
rather than branches, for example, or apps rather than cash machines, to offer
basic banking products and ser vices.
Modest-sized fintech firms and large tech giants continue to make retail banking
inroads worldwide, providing ser vices that leverage the best in digital technolo-
gy to deliver a customer experience that removes cumbersome steps from both
routine and more involved banking engagements. Relative financial newcomers
like AliPay (China), WeChat (China), Rakuten (Japan), Atom (UK), Monzo (UK),
Starling (UK), N26 (Germany) and Revolut (UK) have joined household names
like PayPal, Amazon and Google to disrupt the banking ecosystem, leveraging
modern infrastructures and innovative cultures.
The Challenger Bank Battlefield report placed the challenger banks into quadrants
along four axes:
• Niche Disruptors: These challengers are tr ying to meet existing needs

in the financial industr y by solving specific business problems with do-
main-specific\software applications and technologies. They have a strong
engine for innovation, as their deep focus on relatively narrow subject areas
generates thought leadership and intellectual capital.
• Digital Enhancers: These challengers benefit from strong brand awareness

and a wider set of product offerings, but may have gaps around the broader
execution capabilities. They may have gaps in organizational or sales char-
acteristics for capturing significant market share.
• Value Redefiners: These challengers have best-in-class execution capabil-

ities together with the organizational characteristics to capture significant
market share in their chosen target markets. They usually demonstrate an
appetite for on-going investment in innovation, often matched by strong
alliance strategies with leading incumbents.
• Industry Transformers: These challengers have the necessar y depth and

breadth of market penetration and branding, combined with the organiza-
tional characteristics to capture significant market share by volume and
value. They also have the range and diversity of offerings, geography cover-
age, and financial strength to be able to absorb demand volatility in specific
sectors or geographic regions.

The biggest challenge in the future may end up being the emergence of big tech
players as a force in the banking battlefield. According to Bain, “Many of the
tech giants possess the ingredients of success: digital prowess, large custom-
er bases, organizations well versed in improving the customer experience, and
ample leeway to extend their corporate brands into banking.” More concern-
ing may be that some of these firms are generating a level of trust previously
reser ved only for traditional banks and credit unions. As a result, an increasing
percentage of consumers are willing to use financial products offered from
these non-traditional firms – especially where the experience is superior to that
offered by legacy organizations.
It is expected that demand for products and ser vices from fintech firms and
large tech companies will only increase as more consumers become familiar
with new digital offerings. This is especially true for younger consumers, who
have grown up with digital devices. More and more, people will get annoyed
when they’re forced by bank policies and processes to use non-digital channels
for ever yday banking business, states the Bain research. This includes rudimen-
tar y transactions as well as being able to open new accounts or apply for loans.
CHART 29:
CONSUMERS TRUST PAYPAL AND AMAZON
ALMOST AS HIGH AS TRADITIONAL BANKS
United States United Kingdom
More Trust
Primary bank 1.7 Primary bank 1.7
All banks 3.3 All banks 3.1
PayPal 4.0 PayPal 3.4
Amazon 4.3 Amazon 4.6
Apple 5.1 Apple 5.4
Google 5.4 Google 5.5
Microsoft 5.5 Microsoft 5.7
Facebook 7.4 Facebook 7.5
Snapchat 8.3 Snapchat 8.2
Less Trust
* Average user ranking on a scale of 1 to 9, with 1 indicating highest trust
Source: Bain © December 2017 Digital Banking Report

The best way to prepare for the inevitable increase in competition that the contin-
ued expansion of banking services offered by Amazon, Google, PayPal, Facebook
and an increasing number of start-up banks will bring is to be proactive in the
development of personalized digital solutions. This will most likely involve new
partnerships inside and outside of traditional banking organizations and a redefi-
nition of what a banking ecosystem includes.
In other words, if banks don’t reorient their approach and radically accelerate
their rate of progress, loyalty will suffer, and they will watch technology firms
poach more business. Meanwhile, their economics will erode as too many routine
transactions continue to flow through expensive branch and call-center networks.
There is a great advantage in the customer and member insights that traditional
financial institutions possess. The key is to apply these insights in ways that di-
rectly and positively impact the digital experience, similar to how large tech firms
currently improve shopping, social, search and payments.
“The most significant change in the financial services industry

next year will be the entry of 4th gen competitors. Not banks,
not fintech firms, and not tech giants, but left-field players chal-
lenging banking indirectly with their own virtual currency eco-
systems. Expect plays from the likes of Lego, Starbucks, Disney,
McDonalds, Coca Cola, Shell & Budweiser.”
– Chris Gledhill, CEO and Co-Founder of Secco
“In 2018, we will see one of the tech platform players (Amazon, Alibaba, Tencent,
Baidu, Google, Microsoft, Facebook, etc ) make a move in Fintech that will make
all existing FinTech startup innovations look futile.”
– Peter Vander Auwera, Founder, Petervan Productions
“In 2018, open banking will move for ward significantly in some markets. At the
same time, firms such as Alipay will expand internationally, with both Alipay
and Amazon pushing their payment solutions and getting into lending and other
ser vices.”
– Alain Enault, General Manager and Program Director at Efma
“E-commerce and payments giants from China (Tencent, Alibaba) will make sig-
nificant inroads in the U.S. market, raising the stakes for Amazon and WalMart,
and just about ever ybody in the payments space. Consumers will benefit from
new digital-enabled experiences, simplified payment options, and heightened
competition.”
– Steven Ramirez, President of Beyond the Arc
“Insurance will stay on top of fintech trends in 2018, as the industry faces a chal-
lenge to generate and collect more data on customers. We will see more incum-
bents developing ecosystems of tech/startups/partnerships around them to build
the next insurance generation and better compete with new players (GAFA-BATX).”
– Florian Graillot, Partner at astorya.vc

“2018 will see a US fintech get a full bank charter. Whether it’s
with the OCC fintech charter, or if SoFi succeeds in getting an
industrial bank charter, it will happen one way or another.”
– Bryan Yurcan, Senior Writer at American Banker
The Challenger Bank Battlefield

The Challenger Bank Battlefield report developed
in partnership with Devie Mohan, President and ISSUE 247// MARCH 2017
CEO of Burnmark provides insight into more

than 30 fintech challenger banking organizations
globally. Beyond a review of the strategies and
products offered, this report includes an analysis
of the competitive positioning of the organiza-
tions reviewed.
The report also includes interviews with challeng-

er banking organization founders and financial
services industry leaders. The report has 82
pages of analysis and 15 charts/graphs. Finally,
the report includes secondary research into the The Challenger
competitive marketplace and guest articles from Bank Battlefield
the challenger bank battlefield PA G E 1
organizations who are close to those organiza-

tions involved.
You can download an executive summary of this Digital Banking Report or order a
copy of the report by clicking here.

Testing Blockchain Applications
More and more banks are exploring blockchain technology for

several reasons, primarily cost savings and efficiency. While still
in the embryonic stage, a handful of large global banks have
started to patent their own blockchain-based applications.
Satoshi Nakamoto, the unknown Today, blockchain is no longer just

person or persons who designed the about bitcoin or the broader category
cryptocurrency, went on to say “digital of cryptocurrency; it’s an exploded
signatures provide part of the solu- view of the underlying technology. It’s
tion, but the main benefits are lost if unique and differentiated in that it’s an
a trusted third party is still required to immutable ledger with a single version
prevent double-spending” in the original of the truth of the transaction.
whitepaper.
And unlike other immutable data stores,
In the proposed solution, the “network it is also a shared or distributed ledger
timestamps transactions by hashing across a peer-to-peer private or pub-
them into an ongoing chain of hash- lic network. It leverages a consensus
based proof-of-work, forming a record mechanism to create permanent re-
that cannot be changed.” He further cords of transactions through a distribut-
described the concept of miners where ed and decentralized network, removing
“a majority of CPU power” would gen- the need for a central authority.
erate the longest chain and outpace
attackers or malicious intent.

Source: BI Intelligence © December 2017 Digital Banking Report
Ultimately it intends to create a trustless exchange of goods, services and/or real assets in a
more trustworthy way — And with a potentially much lower cost of transaction.
Why should we all care? While financial services is the sector most likely to be disrupted, block-
chain technology is poised to improve customer experience, streamline product features, and
enable our global economic system to reshape market structures that will impact us all from Wall
Street to Main Street.
Financial services marketers, retail bankers, product managers and customer service executives
will all be impacted by the progress of blockchain technology. One of the first overarching impacts
could be in the development of a system of universal identity verification, that will impact every-
thing from new account opening to cybersecurity.
Leaders must be prudent and act now in evaluating blockchain as the types of deployments
evolve, while regulators need to re-evaluate policies and processes given the enhanced transpar-
ency that technology promises.

“It has long been anticipated that blockchain will eventually

transform the way we transact — largely by automating process-
ing and reducing costs. 2018 will be the year banks get real
traction with their blockchain initiatives and when we see banks
implement solutions that address areas like KYC, loan fulfillment
and cross-border payments.”
– Nick Bilodeau, Head of Marketing, Insurance (Canada) American Express
“2018 is when banks start to realize the value of crypto currencies and start of-
fering mainstream wallet services for normal people to store their crypto curren-
cies. The current offerings (like coinbase) have so much friction that this market
is ripe for the taking for banks.”
– Deva Annamalai, Director, Innovation and Insights Fiserv
“Blockchain will definitely see the light in banking in the field of Supply Chain
Finance, saving tedious paper work, reducing settlement times, risks, fraud, costs
and increasing transparency.”
– Maria Jose Jorda Garcia, Chief Innovation Officer, BBVA Microfinance

Foundation, BBVA
“The hype around block chain, and specifically bitcoin, has risen to a fever
pitch. The trend next year will be to consolidate interest in blockchain, as a
technology having the capacity to disintermediate many financial ser vices com-
panies altogether.”
– Don Peppers, Futurist and Co-Founder of CXSpeakers
“Blockchain technology will start to be used more extensively in

the financial services industry in 2018. Permissioned distribut-
ed ledgers will be used for the sharing of contracts, documents,
data and the processing of certain payments. Then the technol-
ogy will fade into the background — just another piece of the IT
machinery for many companies.”
– Penny Crosman, Editor at Large, American Banker
“2018 will be the advent of the Hashgraph (blockchain competitor) opening dis-
concerting cases of decentralized use of applications such as micro-payments,
distributed capital markets, live collaboration applications, distributed MMOs,
auctions and more.”
– Jean-Baptiste Lefevre, Digital Experience Lab, BNP Paribas

Closing Thoughts
As we begin 2018, the only constant in the banking industry will

be change in consumer expectations, change in digital technology,
change in regulations and change in competition. The best
defense in 2018 will be a strong offense with data and analytics
at the core.
“The great advancements we
have seen in finance digitali-
zation and fintech creation will
strongly impact financial inclu-
sion in 2018, helping democ-
ratizing finance for the 2 billion
adults missing in the game.
It is time for a new digitized
banking ecosystem to reach
more people, allowing for more
business creation and econo-
my improvement.”
– Maria Jose Jorda Garcia, Chief
Innovation Officer, BBVA Microfinance
Foundation, BBVA

“The monetization of underused resources that started with Uber and Airbnb will
become mainstream in financial services. Thanks to secure decentralized systems,
untapped sources of individual capital can be invested and lent in new ways. The
larger trend behind that – is the emerging tokenization of the economy.”
– Sebastien Meunier, Senior Manager at Chappuis Halder & Co.
“Diversity and inclusion will become a primary topic in board room discussions
and strategic plans. Seats at the boardroom table will be a new metric that mat-
ters. And yes, the 2017 climate impacted this dynamic.”
– Lisa Kuhn Phillips, VP at Allied Payment Network
“2018 should be a year of very visible divergence, where the most tech-savvy
companies will accelerate their investments in innovation and new strategies,
while those slower to adapt will just try to automate their processes.”
– Huy Nguyen Trieu, Author, Disruptive Finance
“2018 will be known as the year of action. There’s been a lot of conversations,
meetings, demos, plans, etc, but there is an urgency now to get projects planned
and funded to create new customized engagement models and a variety of prod-
ucts/services from which to choose for more personalized client experience.”
– April Rudin, Founder and CEO at The Rudin Group
“There is an ever-growing talent gap that is keeping banks and

credit unions from maximizing their digital growth potential. In
2018, the leading banks and credit unions will bridge this digital
talent gap through short-term outsourcing or partnering, while
they plan for ongoing training .”
– James Robert Lay, CEO, Digital Growth Institute

Appendix: Research Methodology
The foundation of the research conducted for the 2018 Retail Banking
Trends and Predictions report was a collection of interview responses
from a crowdsourced panel of more than 100 financial services
industry leaders and influencers, including bankers, credit union
executives, industry analysts, advisors, authors and fintech leaders
from Asia, Africa, North America, South and Central America, Europe,
the Middle East and Australia. The initial request for interviews and
follow-up research was conducted in early December 2017.
Supplementing these inter views was a sur vey of more

than 300 financial ser vices organizations as well as
suppliers/solution providers. The breakdown by location
indicated that 56% of the sur vey respondents were from
the US, 13% from Western Europe (other than the UK), 6%
from both Asia and Canada, 5% from the UK and 4% from
Australia. 10% of the respondents were from other coun-
tries (Eastern Europe, Central and South America, Africa
and the Middle East).
Among sur vey respondents, 43% were from suppliers, 20% are from large nation-
al or regional banks, 16% are from community banks, and 15% are from credit
unions.

CHART 30:
RESPONDENTS BY TYPE OF ORGANIZATION
What type of company do you work for? (n=565)
19% Large national

or regional bank
Community bank
45% Credit union
15%
Other financial services
Supplier/provider to
financial services industry
15%
6%
Roughly 24% of financial institution respondents are from FIs with more than
US$10 billion in assets, with 39% having US$1 billion – US$10 billion in assets
and 35% representing firms with less than US$1 billion in assets.
CHART 31:
RESPONDENTS BY ASSET SIZE (IN US$)
4%
13% More than $50 billion
14%
$10 billion to $50 billion
11%
$1 billion to $10 billion
20% $500 million to $1 billion
$100 to $500 million

38% Less than $100 million

Finally, the respondents who participated our research were globally headquar-
tered. While there was an over sampling from the United States (54%), 5% were
from Canada, 11% were from Western Europe, 10% from Asia, with 4% Eastern
Europe and 3% from Australia
CHART 32:
RESPONDENTS BY LOCATION
2% 2% 2% United States
3%
3% Western Europe other than U.K.)
Asia
4% United Kingdom
5% Canada
5% Eastern Europe
53%
Australia
10%
Africa
11% Other
Middle East
Central and South America

DIGITAL PAYMENTS AND MOBILE WALLETS
Online Survey
Questions...
1. What type of company do you work for?
2. What is the asset size of your institution (in US$)?
3. What are your top 3 strategic priorities for 2018 as

an organization?
4. Has your organization partnered with a fintech firm?
5. What do you think were the three most important

retail banking trends in 2017? (FIs and Suppliers)
6. What do you think will be the three most important

trends for the retail banking industry in 2018?
(FIs and Suppliers)
7. Which area of traditional financial services is most

likely to be impacted by non-traditional providers in
2018? (FIs and Suppliers)
8. What three non-bank organizations will have the

most impact on retail banking in 2018?
9. Where is your company headquartered?

About the Author

Named as one of the most influential people in banking and a
Top 5 Fintech Influencer to Follow, Jim Marous is an interna-
tionally recognized financial industry strategist, co-publisher
of The Financial Brand and the owner and publisher of the
Digital Banking Report. The Digital Banking Report is a sub-
scription-based publication that provides deep insights into
the digitization of banking, with over 150 reports in the digital
archive available to subscribers.
As a sought after keynote speaker, author and recognized authority on disruption

in the financial services industry, Marous has been featured by CNBC and CNN,
Cheddar, The Wall Street Journal, New York Times, The Financial Times, The Econ-
omist, The American Banker, Accenture and the Irish Tech News and has spoken
to audiences worldwide. Jim has also advised the White House on banking policy
and is a regular contributor and guest host for the Breaking Banks podcast.
You can follow Jim on Twitter and LinkedIn or visit his professional website.

Thank You
I would like to thank the more than 100 members of this year’s
crowdsourced panel (who are shown on the following pages) who
accepted my invitation to be interviewed for this expansive annual
report. The insight shared was extraordinary, and the continued
support of this effort is greatly appreciated.
I would also like to thank the more than Without their support, this research and
400 banks, credit unions, suppliers report would not be possible. I don’t
and vendors who took the time to help think there is any annual research avail-
us prioritize the trends from both 2017 able that provides as in-depth a review
and 2018. I know these participants are of annual trends from such a diverse
very busy, so some special thanks. audience. This year’s report was the
largest ever published by our team.
I would also like to thank Carol Ryan,
Jim Booth, Jeffry Pilcher and Geoffrey Here’s to great success in 2018!
Rucinski — plus the rest of our team for
their daily support, inspiration, insights Jim Marous,
and laughs. As always, my wife Linda Owner and Publisher
and my son Cameron also get a huge Digital Banking Report
thank you for putting up with me every
day and especially close to deadlines.
Finally, I would like to thank the spon-

sor of this year’s research, Kony, Inc.

2018 Crowdsource Panel

Deva Annamalai James Anthos Keith Armstrong
Director, Innovation and SVP, Director of Strategic Co-founder
Insights Planning Abe AI Inc
Fiserv BB&T
Wade Arnold Peter Vander Auwera Niti Badarinath

Advisor Founder Head, NA Channels
BillGO Petervan Productions BMO
Scott Bales Paolo Barbesino Zilvinas Bareisis

Managing Director SVP, Head of Digital, CEE Retail Senior Analyst
Innovation Labs Asia UniCredit Celent
Don Bergal Nick Bilodeau Dave Birch

CMO Head of Marketing, Insurance Director of Innovation
Avoka (Canada) Consult Hyperion
American Express
Duena Blomstrom Anne Boden Kirk Borne

Chief Growth Officer Temenos CEO Principal Data Scientist &
Marketplace Starling Bank Executive Advisor
Temenos Booz Allen Hamilton
David Brear Matteo Carbone Bryan Clagett

CEO Founder and Director CMO
11:FS Connected Insurance Geezeo
Observatory
Penny Crosman Alain Enault Roberto Ferrari

Editor at Large General Manager & Program Chief Digital and Innovation
American Banker Director Officer
Efma Mediobanca Group
Rob Findlay Michael Fisher Chris Fleischer

Founder & CEO Full-time Analyst Director
Next Money TechCPU Fiserv
Dennis Gada Maria Jose Jorda Garcia David Gerbino

Regional Head, Financial Chief Innovation Officer Principal
Services BBVA Microfinance Foundation @dmgerbino consulting
Infosys


Chris Gledhill Florian Graillot Jennifer Grazel
CEO and Co-Founder Partner Global Director, Vertical
Secco astorya.vc Marketing
LinkedIn
Tom Groenfeldt Danielle Guzman Alessandro Hatami

Writer Global Head of Social Media & Managing Partner
Forbes Distributed Content Forestreet
Mercer
James Haycock Rob Heiser Alpine Jennings

Managing Director CEO Director, Deposits
Adaptive Lab Segmint State Farm Bank
Alex Jimenez Kyle Kehoe David Kerstein

VP and Senior Strategist President, ACTion division President
Zions Bancorporation CRIF Lending Solutions Peak Performance Consulting
Group
Dr. Robin Kiera Brett King Alex Kreger

Insurtech & Fintech Thought Best selling author and CEO
Leader and Founder of CEO/Founder UX Design Agency
Digitalscouting.de Moven
Dan Latimore Theodora Lau James Robert Lay

SVP, Banking Director, Market Innovation CEO
Celent AARP Digital Growth Institute
Jean-Baptiste Lefevre Bradley Leimer Todd Linden

Digital experience Lab Managing Director, Head of CEO, Paysafe Payment
BNP Paribas Fintech Strategy Processing North America
Explorer Advisory & Capital Paysafe Group
Dion F. Lisle Elizabeth Lumley Don MacDonald

VP, Head of Fintech Global FinTech commentator, CMO
CapGemini Advisory Board Member MX
Spiros Margaris Jim Marous Sam Maule

Founder Co-Publisher, The Financial Managing Partner, North
Margaris Advisory Brand & America
Owner, Digital Banking Report 11:FS


Craig McLaughlin Sebastien Meunier Devie Mohan
President Senior Manager Co-founder and CEO
Extractable Chappuis Halder & Co. Burnmark
Tiffani Montez Alex Nechoroskovas Chris Nichols

Senior Analyst Founder Chief Strategy Officer
Aite Group FinTech Summary CenterState Bank
JP Nicols John Owens Jenni Palocsik

Managing Director, Fintech Senior Digital Financial Advisor Director, Solutions Marketing
Forge & Chairman, Next Money Digital Financial Advisory Verint
Americas Services
Jay Palter Don Peppers Kosta Peric

Chief Engagement Officer Futurist and Co-Founder Deputy Director, Financial
Jay Palter Social Advisory CXSpeakers Services
Bill & Melinda Gates Foundation
Jim Perry Lisa Kuhn Phillips Lori Philo-Cook

Consultant and Strategist VP Owner
Market Insights Allied Payment Network Innovo Marketing
Mike Quindazzi Steven Ramirez Matteo Rizzi

Managing Director President Co-Founder
PwC Beyond the Arc FinTechStage Limited
April Rudin Antonio Sanchez Tom Shen

Founder and CEO Sr. Manager, Product Marketing CEO
The Rudin Group Kony, Inc Malauzai Software, Inc.
Ron Shevlin Makoto Shibata Paolo Sironi

Director of Research Head of Global Innovation FinTech Thought Leader /
Cornerstone Advisors, Inc. Bank of Tokyo-Mitsubishi UFG Author
IBM Watson Financial Services
Chris Skinner Brian Solis Andra Sonea

CEO Author, Digital Analyst and Fellow
The Finanser Ltd. Anthropologist Anthemis Group
Future Works


Andreas Staub Nicole Sturgill Joe Sullivan
Managing Partner Principal Executive Advisor, CEO
FehrAdvice & Partners AG Retail Banking Market Insights, Inc.
CEB is now Gartner
Mary Beth Sullivan Danny Tang Ambrogio Terrizzano

Managing Partner Channel Transformation Financial Services Lead, Europe
Capital Performance Group Leader, Global Banking Accenture
IBM
Huy Nguyen Trieu Jim Van Dyke Ronald van Loon

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DBR 253 2018 Retail Banking Trends Predictions

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DBR 253 2018 Retail Banking Trends Predictions

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ISSUE 253// DECEMBER 2017

Whether or not your organization decides to explore advanced tech-

Copyright 2017: DIGITAL BANKING REPORT (ISSN 2375-3455)

Publisher: Jim Marous, jmarous@digitalbankingreport.com

Table of Letter from the Publisher | 4 |

Letter from the Publisher

© 2017 Digital Banking Report. All rights reserved. PAGE 4

ISSUE 246// JANUARY 2017 ISSUE 250// SEPTEMBER 2017

Order your subscription today and receive

■ Guide to Digital Lending

■ Banks + Fintech: Partnerships for Growth

■ 2018 Financial Marketing Trends

With the industry leading digital banking platform and a

The future of banking is here. Find out if you’re ready at

© 2018 Kony, Inc.

© 2017 Digital Banking Report. All rights reserved. PAGE 7

• From the trends and predictions provided by the crowdsourced

• Looking back to last year, how would these same organizations

• What are the strategic priorities as ranked by financial ser vices

• What traditional and non-traditional organizations pose the

© 2017 Digital Banking Report. All rights reserved. PAGE 8

• The greatest threat to traditional banking norms was expected to

• Payment ser vices were expected to be the most impacted product

© 2017 Digital Banking Report. All rights reserved. PAGE 9

The ranking of the top 10 trends and predictions was done by

© 2017 Digital Banking Report. All rights reserved. PAGE 10

Open APIs 35%

© 2017 Digital Banking Report. All rights reserved. PAGE 11

Finding & utilizing

© 2017 Digital Banking Report. All rights reserved. PAGE 12

Top 10 Strategic Priorities for 2018

© 2017 Digital Banking Report. All rights reserved. PAGE 13

– Nicole Sturgill, Principal Executive Advisor, Retail Banking CEB

– Mary Beth Sullivan, Managing Partner of Capital Performance Group

“2018 will be an amazing year in banking. The debate on crypto-

© 2017 Digital Banking Report. All rights reserved. PAGE 14

– Danielle Guzman, Global Head of Social Media and Distributed Content at

“As technological innovation accelerates and financial systems globalize, social

© 2017 Digital Banking Report. All rights reserved. PAGE 15

3. Supporting Multichannel Delivery. As mentioned in last year’s trends report,

5. Building Fintech Partnerships. Continuing a trend that emerged in 2016, lega-

© 2017 Digital Banking Report. All rights reserved. PAGE 16

6. Upgrading Digital Payments. The use of mobile payments continues to be less

7. Navigating Compliance and Regulations. The financial services regulatory

8. Exploring Advanced Technologies. Opportunities around blockchain technology

10. Testing Blockchain Applications. While bitcoin and other cryptocurrencies

© 2017 Digital Banking Report. All rights reserved. PAGE 17

Improving the Customer Experience

There has never been a more important Moving from a product-focus to a

To succeed, banks and credit unions need Focusing on long-term relationships.

© 2017 Digital Banking Report. All rights reserved. PAGE 18

customer through onboarding and advisory engagements. With the tremendous

The Fintech and Big Tech Advantage

© 2017 Digital Banking Report. All rights reserved. PAGE 19

Time is Not on Banking’s Side

New competitors are innovating and delivering customer-focused solutions at every

In China, WeChat is combining financial services with eCommerce, insurance and

Action Items for Success

1. Move the focus of digital engagement from cost reduction to experience

© 2017 Digital Banking Report. All rights reserved. PAGE 20

2. Leverage advanced analytics, machine learning and contextual engagement to

5. Engage end-to-end throughout the customer journey, from shopping to account

Gain efficiency 25%

Improve retention 21%