The New Age Banking-Bank Management Strategies in the 21st Century

Module 2 - Unleashing the Power of Digital in Financial Services

Digital re-imagination, revolution & transformation

What was the most significant

development in human history?

A difficult thing to pin point….but 2

Digital re-imagination, revolution & transformation

It’s the Steam Engine

“It made mockery of all that had

gone before it”
Ian Morris - Historian

3
 Digital re-imagination, revolution & transformation

Are we entering the most

transformative period in history?
• Certainly Yes

• Does not mean future will not see something superior to what is there today

Number of things around us are transforming the world across multiple dimensions 4
Digital re-imagination, revolution & transformation

The Third Revolution

Ushered in by a convergence of
multiple forces and a new general
purpose technology platform

Agricultural revolution, Industrial Revolution…and now 5

Digital re-imagination, revolution & transformation

It’s the Digital Revolution

It’s the convergence
of multiple forces of

Social Mobile Analytics Cloud AI Robotics

6
Digital re-imagination, revolution & transformation

What has Digital done to this world?

FarmVille is a farming simulation social network game

There are more players of Farmville than Farmers in the Western World 7
Digital re-imagination, revolution & transformation

What has Digital done to this world?

What has Digital done to this world?

More people in the world own a Mobile phone than a Toothbrush 8

Digital re-imagination, revolution & transformation
People perform 3,000 > 3 million search
Twitter sends >540
million tweets a What has Digital done to this Instagram
Foursquare check-ins a world?
queries a minute in
Google
shares
day minute >5,600 new photos a minute

Mobile Web receives 317

new participants a minute People send > 244.8
Consumers spend billion email 3,125 new photos a
> $ 472,000 on Web
shopping a day
messages a day minute in
Flickr
What has
> 971 new websites are
created in a minute
Digital done
> 4,500,000,000,000,000,000 bytes of
data (4.5 exabytes) are produced every
to this
WordPress bloggers day Brands receive >34,000 world?
publish550 new blog posts Facebook ‘likes’ a minute
a minute
People on Face
Book share > Apple receives 67,000 app
People upload 984,000 bits of downloads a minute
➢72 hours (259,200 content a day
Tumblr blog > 37,000 new
seconds) of video posts a minute
to YouTube a minute

Digital has converted this great world to a Global Village 9

Digital re-imagination, revolution & transformation

Industrial Age Digital Age

Physical Production Connections

Manual labour Human Intelligence

Humans: Robots Humans: Innovators

Digital Age sees humans as creative & innovative value-adders 10
 What is Digital ? Why Digital?
• The meaning of digital

➢ has been evolving over the last few years

➢ because of ongoing enrichment – almost every day
➢ because of refinement due to ever growing technological innovations

• Digital generally refers to

➢ all products & services delivered through virtual technology

• Digital channels refer to

➢ media that conveys information digitally, such as the internet

• Digital support/device refer to

➢ a product used to receive information conveyed by digital channels such as a tablet

Today, Digital is also about enabling deep dive into customer intimacy and stickiness 11
 Why Digital & What is Digital?

Passive Changing
role of the Interactive, Engaged, Iterative Buyer
Curtailed feedback Customer
Influencer

Uninformed Innovator

Opaque Solution Integrator/Developer

Digital era
Physical era

Peer Advisor
High person dependence

Empowered
Accepted shelf products

Conditioned mindset to organization Conditioned mindset to her/his needs

Security/identity - 1 dimensional Experience driven - security/identity

Experience incidental/accidental High experience orientation

The truly empowered customer in the digital age is the real King in the Digital Era 12
 Why Digital & What is Digital?

Growth-oriented
Structural change
Relationship-based
The Future Edge drives design - Core adapts
Flat
Business
Ecosystem Services
Effective Place

Key Enablers
Characteristics

Insight-driven Next Generation Experiences

Experiential Systems of Engagement

Open, agile and collaborative Sense and Respond Systems
Responsive and adaptive
Collective Intelligence
Fast, iterative and experimental
Descriptive to prescriptive
Powered by knowledge
Powered by creativity and ideas Think differently

The future Business place deploys the key enablers to have characteristics that would create empowered customers 13
Why Digital & What is Digital?

Value ecosystem Products and services

▪ Networked market structures ▪ Commoditization of core offerings
▪ Digital participants/influencers ▪ Innovation process
▪ Digital transformation of participants ▪ New value add offerings
▪ Alteration in chain linkages/transactions ▪ Market erosion of core products/services
▪ Speed of effect/horizon ▪ Digitization of traditional products /services
▪ Processes ▪ Ecosystem enabled product and service bundles
▪ Data/Insight/outcomes ▪ Strategic processes packaged and sold as services
▪ New /extended value in the chain ▪ Portfolio management
▪ Competitive threats
▪ Tools and systems
▪ Glocalization (globalization/localization)
▪ Digital substitutes
Culture and Organization
Go-to-market ▪ Performance
▪ Pricing
▪ Attrition
▪ Channels to market
▪ Organization design
▪ Competition from new entrants
▪ Recruiting
▪ New markets opened by digital
▪ Go-to-market shifts due to digital
▪ Emerging markets
▪ Access to new market segments
▪ Direct-to-Customer
▪ Competition
▪ Peer-to-peer

The FOUR facets of an enterprise that are changing in Digital have re-defined the way in which business is done 14
Why Digital & What is Digital?

➢ Mobility: The ability to constantly connect to customers and the

products sold to them

➢ Big Data: enables companies to make sense of the data explosion

➢ Social Media: allows companies to make the whole world a

perpetual focus group

➢ Cloud : enables companies have huge computing resources at their

disposal without having to invest in them

➢ AI and Robotics: optimize the need for human intervention

These 5 forces will be the weapons of power for the future of an organization 15
 The Digital play ground ……

Omni-channel engagement : reach through Contextualized propositions: quicker dissemination,

preferred touch point for each segment flexible bundling, intelligent advisory

Positive - Cross sell/Up sell DIGITAL

Negative - Regulations, Profitability orientation Seamless offerings subscriptions -
AGENDA leverage ‘Paperless’, virtual support
Serve and shared KYC

Intelligent service proposition to accommodate

workforce enablement & optimization

The Digital play ground will enrich & enhance quality of Engage, Transact & Conduct ! 16
Digital in the Retail World ……

What is driving the change?

CUSTOMER …today
Connected
Aware
Demanding

Today’s customer is demanding because of his awareness and is always connected too ! 17
Digital in the Retail Industry World ……

1. Expanding Digital is everyone’s Top Agenda and the entire Digital

organization is impacted by it

2. Delivering the personalized “one” customer experience is

a key investment for the future and is being driven by Big One customer
Data/Analytics and mobile experience

3. Its time to “re-imagine” the store experience and keep

stores relevant to the customers. In-store technology will Redefining store
drive this transformation ( Associate/customer mobile, experience
Kiosks, Aug Reality, POS)

4. There is tremendous focus across the board on Simplify to be

rationalization, standardization and simplification to agile
drive better efficiency and improve agility

Today’s banking is taking quite a few leaves from the retail industry 18
 The world of Channels …… What is a Channel?

• It is a medium / platform / mechanism through which customers can

get delivery of Bank’s products & services

• It typically extends the reach and expands the hinterland of a bank

Today’s customer is demanding because of his awareness and

• Essentially a conduit
is always connectedfor
too exchange of data / information

• A vehicle for obtaining / rendering a banking service

• A convenient window to avail banking products 24/7

• Provides appropriate security and mechanism for electronic

mandate / authority
Customers’ opinion about Banks are increasingly being influenced by these touch points 19
 Banking Channels & Transformation

‘We want to be a tech company with a banking license’

– Ralph Hamers, CEO, ING

Development in Banking channels over the years owe

predominantly to Innovation in Information and
Communication technologies

Innovation remain focussed and concentrated on Customer

experience enrichment and the most important cog in this
wheel has remained customer touch points / channels

Banks have generally been early adopters of new Technologies that emerge from time to time 20
 Banking Channels & Transformation

Channels were and will continue to be the pivots of digital

disruption in the transformation journey of progressive Banks

Customers tend to rate their Bank experience based

on their experience with the channels

Channels serve as valued differentiators in banking where

most offerings are predominantly commoditized

Channels go a long way towards making banking incidental 21

 The world of Channels …… Store / Branch Channel

Strengths Challenges Collaborative

tenets
▪ Preferred channel for ▪ Revenue perspective - ▪ Compliments
client acquisition, time- steady decrease of other channels
tested for conversion of transactional contacts that requires
leads to tangible sales in-person
▪ Cost perspective - on
▪ Recommended channel interaction for
average around 50% of
for provision of advisory sales closure
operating costs are
services persuasion
identified with retail
Store / etc.
▪ Still considered for store network
Branch
various transactions by
the extended
generation
Source: Celent

‘The Physical Channel that used to be the ‘sole’ channel….now its still the ‘soul’ Channel 22
The world of Channels …… Call / Contact Centre

Strengths Challenges Collaborative tenets

▪ Large employee base ▪ Banks have experienced ▪ Potential to

that are dedicated to mixed bag with the appropriately
support various contribution towards compliment various
aspects of customer sales performance services: lead
care and other allied ▪ Cost intensive mode generation, sales
services. when compared with support and enhanced
internet channel for high value client
▪ High dependency on experience primarily
customer service
individual skills in for branch, internet ,
handling customers, ▪ Growing dissatisfaction ATM
Contact / query resolution, with client experience
Call Centre customer emotions, and service quality
etc

Source: Celent

Call / Contact Centres have historically been an ideal candidate for outsourcing 23
The world of Channels …… Automatic Teller Machine (ATM)

Strengths Challenges Collaborative tenets

▪ Primarily cash ▪ Initial infrastructure ▪ Cohesively

transaction investments are compliments retail
fulfillment channel relatively perceived on stores to support basic
that has the strong the higher side transactions and
prospect of augment the contact
▪ The gradual dip in usage
supporting sales flow at prime
of physical cash;
/advisory services locations
compels bank to extend
through humanizing
ATM the service reach of ATM
ATM

Source: Celent

By the very purpose of existence, ATM became synonymous to ‘ Any Time Money’ 24
 The world of Channels …… On-line Channel / Internet Banking / e-Banking

Strengths Challenges Collaborative tenets

▪ Growing acceptance as ▪ Compliment branches

▪ Largely perceived as
an mainstream channel for sales initiation that
an alternative /
from rudimentary can be closed by
substitute for
transactions to online branches, promote
physical distribution
comparison services and product packages and
network
cross-sell up-sell garner relationship with
fulfillment platform ▪ Security aspects customer who rarely
remain a major visit branch
▪ Larger flow of contacts
Internet concern for banks
(5 ~ 6 times larger than
branches) with low costs

Source: Celent

Main reason for success of this channel is the numerous benefits to both customers & Banks 25
 The world of Channels …… Mobile / Mobile Banking / Mobile Devices

Strengths Challenges Collaborative tenets

▪ Touts immediate access ▪ Channel nascence is still a ▪ Compliment other

feature that has to be major concern for banks channels for
appropriately harnessed transaction fulfillment
to support sales and ▪ Skewed clients’ readiness
like authentication
service models to adopt various features
services etc. and also
that are possible over
▪ Disruptive technological for contextualized
mobile devices
Mobile advancement in this sales development
arena throws up ▪ Security concerns still exercises
innovative options for loom large
banks

Source: Celent

Mobile channel has been a great beneficial disruptor especially for the individual user 26
 The 3 Cs in Banking -Channels------- Channels------- Channels-------1/3

• A newer way of engaging and / or transacting with a Bank

• A newer way to expand the reach of services beyond

the traditional brick-n-mortar prime channel
• Enables appropriate changes to Bank’s target market
criteria and add / reduce customer segments

• A newer way of providing extended transaction

hours and going beyond bank holidays

• A newer way to reduce transaction and other costs –

thereby overall profit enrichment

The terminology ‘Alternate channels’ came up at a time when only branch / store channel existed 27
 The 3 Cs in Banking -Channels------- Channels------- Channels------- 2/3

• As the name implies…..its an environment of Bank providing multiple

channels to its customers for transacting various business

• These have evolved over a period of time – thanks to development

Multi-Channel

and innovation in Information & Communications Technology (ICT)

• Typically the channels were developed as independent silos – hence

there was lack consistency in delivery of products & Services

• Channels even compete with each other – all channels trying to

provide all products / services

• Optimising the potential of each channel and balancing them with

customer preferences remain a challenge

The terminology “Multi-Channel’ slowly started to replace the original terminology ‘Alternate channel’ 28
 The 3 Cs in Banking -Channels------- Channels------- Channels------- 3/3

• Progressive banks will exploit untapped opportunities by unlocking

value of each channel

• The physical branches of progressive banks will promote alternate

channels for use by its customers and retain its presence for
Multi-Channel

advisory functions, relationship bonding and for those functions

that other channels are unable to deliver

• ‘Branch Tellers as Bank Sellers’ – they will no longer be human cash

dispensers.

• Call Centre operators will no longer remain as query resolution

robots – but positioned as advisors reaching customers across
multiple channels

Banks started enriching its people behind some of the channels to positions of importance / specialization 29
 Expectations from a Channel ……. 1/2

• User friendliness and Convenience enrichment take the pole

position from customers’ perspective

• Security, Confidentiality and Privacy are the prime parameters that

determine the acceptability and usage of a channel

• Channel up- time and availability for consumers greatly

influence usage density

• Cost effectiveness to both Bank and customers - an absolute

imperative for a channel to sustain

Customer Experience provided today is predominantly determined by ‘channel-value’ experienced by customers 30

 Expectations from a Channel ……. 2/2

• Ability to collaborate and complement with

other channels and not compete with each other

• Customer satisfaction and customer experience are the corner

stones of a banking channel to remain successful across all
parameters

• Ability to counter markets & competition

• Transaction enrichment and ability to scale-up the value chain

Channels are becoming the differentiators as products & services get commoditized 31
 What’s next on the Channels space?

Omni= From Omnis(Latin)

Omni Omni = all, every, everywhere, whole
Channel Eg. Omnipresence, omnibus, omnichannel
Banking

It’s essentially both digital & non-digital channels

made available to the customer for availing same set
of products & services

Not mere choice of channels….. but seamless

and consistent interaction / engagement

Essentially NOT transaction oriented

But Customer oriented, relationship oriented
and customer experience oriented

Omni Channel is not another channel…….it is an environment……an eco-system for superior experience 32
 The next generation in the Channels space

Multichannel Environment Omnichannel Environment

Transact through multiple Interact / Engage through multiple
channels channels

Analytical insights to understand Analytical insights to understand

clients’ needs clients’ wants & likes

Bank-centric view Client-centric view

Bank gets single view of customer Client gets single view of Bank

Based on system of records Based on system of engagements

Integration- SoA reliant Application Collaboration – Reliant on Big data for

with message integration integration of customer context

Omni Channel environment can elevate from transaction mode to Engagement & Conduct mode 33
 Why Omnichannel when multi channel is there ?

Unlike multi channels that get bracketed as

service enhancement and experience
enrichment, this can contribute significantly to
business creation and / or expansion by giving
insights into customer preferences and behaviour

It is not a fashionable Buzz word !

It does not replace multichannel
– in fact enriches the channels !

Today’s customers are used to sophisticated and extremely

personalised offerings based on individual preferences from
other industries like Airlines and Retail. Similar expectations
from Banking is natural. Omnichannel is the answer!

Any Time Banking to Any Where Banking to Any how Banking feasible through Omni Channel Banking 34
 Few examples of omnichannel applicability in Banking

• Customer on-boarding process

• Mortgage origination – huge value chain enrichment

• Insurance – making the whole process extremely incidental

• Wealth Management

• Equity and other securities Trading

• Risk based security and access permission

• Concierge Services, location based advisory, ….

Let us now see a short video – courtesy Bank of America

Convenience enrichment is singularly the biggest benefit of omnichannel 35

 Links for the videos

• Bank of America

https://www.youtube.com/watch?v=JOHQ0LU2zK4
• Car Insurance claim registration – superior customer experience

https://www.youtube.com/watch?v=ZKKADm5UbHQ

• Omni channel Deployment - CISCO

https://www.youtube.com/watch?v=fGDy0x_stqg

36
 Omnichannel Deployment

• Utilize various channel analytics and capture customer intent

• Intent capture should be across all channels
• Eg. web analytics to analyze online behaviour – for internet
Capture • Location based information and insights – for mobile devices
• Emotion etc through speech analytics – for contact centers
• Sentiments etc through social sentiment analytics – for social networks
• All subject to applicable regulations and state policies

• Captured data / information on intent will be in various forms / formats

Manage • Need to be segregated as structured and unstructured ( video, audio, etc)
• Need to be stored and managed separately

• Bigdata technologies today have matured and can be relied upon for banks to derive
actionable insights
Analyze • This can help banks to provide personalized and differentiated service
• Customer base can be enriched and / or widened through targeted marketing offers etc

Source : IBM omnichannel Banking

The omnichannel environment will elevate channels from being mere service oriented to being business enhancers 37
Omnichannel will change the rules of the Game

When the ‘rules of the game’ change…….

the ‘weak’ will perish ….…..

the ‘mediocre’ will just comply….

the ‘good’ will adapt fast to usher a quick BaU

the ‘smart” will innovate to capitalise on the change

…………………….and its Omnichannel that will enable this 38

 The New Age Banking-Bank Management Strategies in the 21st Century

Module 2 - Unleashing the Power of Digital in Financial Services