Digital In Banking - Summary Trends - Virginia Bankers Association - March 2015

Blackstone Technology Group Proprietary and Confidential

Prepared by: Prepared for:Ken HansPartner, Executive Director

Financial Services

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Table of Contents

Digital Trends

Shifting Banking Trends

Here Come the Millennials

Strategies to Reach Customers-Digital Banking 1.0

Emerging Strategies to Reach Customers-Digital Banking 2.0

Takeaways

Blackstone Technology Group Proprietary and Confidential 3/11/2015

Global ‘Tech’ Statistics Related to Our Everyday Life

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3/11/2015Blackstone Technology Group Proprietary and Confidential

It is estimated that 10% of all photos in existence on the planet were created in last 45 days

Digital Trends

Banking & Technology

Conference, 2014

“It is estimated that every 24 hours the world produces a greater volume of overall digital content than all paper-based books, newspapers and magazines ever made”

Given how much digital data the world is consuming, digital information scientists see that the world is not far away from having to commonly quantify data capacities in yottabytes

Value Metric

1000 kB kilobyte

10002 MB megabyte

10003 GB gigabyte

10004 TB terabyte

10005 PB petabyte

10006 EB exabyte

10007 ZB zettabyte

10008 YB yottabyte

‘Tech’ Statistics Related to MY Everyday Life

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Number of Household Internet-Connected Digital Devices

This Speaker’s Household

Dad, Age 43Mom, Age 43Daughter, Age 9Son & Daughter (twins), Age 7Son, Age 5

Mobile Devices1.Samsung Galaxy S5 (Dad)

2.iPhone 5s (Mom)

3.iPhone 4s (Kids HMD)

4.iPhone 4 (Kids HMD)

5.iPod Touch (Kids)

6.iPod Touch (Kids)

Tablets1.iPad Air (Dad)

2.iPad3 (Mom)

3.iPad2 (Kids HMD)

4.iPad (Kids HMD)

5.Kindle (Mom)

6.Kindle (Daughter)

Laptops1.Dell-Windows7 (Dad)

2.Dell-Linux (Mom)

3.Dell-Linux (Kids HMD)

Media Servers1.Dell-Linux (Dad)

2.Sony-Linux (Dad)

NotesHMD – hand me down

- engaged in digital banking

Digital Trends

Source: AntiqueTech: The ENIAC vs. The Cell Phone, http://www.antiquetech.com/?page_id=1438

Source: Wikipedia: ENIAC (http://en.wikipedia.org/wiki/ENIAC)

Modern Phones/Devices

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VS. An ‘Old School’ Mobile Device

The First Computer

The ENIAC – The Electronic Numerical Integrator And Computer

Cost: $6,000,000

Size: 8’ H x 3’ D x 80’ L

Weight: 30 tons

Uptime: 50%

Digital Trends

Samsung SGH-A850 ‘Flip’ phone

Cost: $350 (17,000x less)

Size: 1.5”H x 0.5” D x 2.5” L (40Mx smaller)

Weight: 8 oz (120,000X lighter)

Uptime: 99.999%

Calcs per Second: 385

Calcs per Second: 390,000 (1000x)

http://www.antiquetech.com/?page_id=1438

And How about ‘Modern’ Mobile Devices?

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Five Fast Facts on Modern Smartphones

Digital Trends

Source: Gadgets Arena: 5 Mind Blowing Facts about your smartphone (http://www.gadgets-arena.com/5-mind-blowing-facts-about-your-smartphone/)

1. Off the Charts Processing PowerENIAC => Flipphones => Smartphones

Calcs/Commands per Second 385 390,000 28,000,000,000

xFaster -- 1,000 72,000

2. By Definition, it IS a PC

3. Smartphone Market is fastest growing industry

‘A personal computer (PC) - a general-purpose computer, whose size, capabilities and original sale price makes it useful for individuals, and is intended to be operated directly by an end-user with no intervening computer operator’.

1975 to 2008: 1 billion computers were sold (desktops, laptops and servers)2013: 1 billion+ smartphones were sold

Around 80% of the world’s total population now has a smartphone

And How about ‘Modern’ Mobile Devices?

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Five Fast Facts on Modern Smartphones

Digital Trends

4. NASA will use smartphones as ‘cheap satellites’

5. Devices that Smartphones now replace

PhoneSat takes advantage of commercial products already imbued with:

1) speedy computing chips

2) lots of memory

3) ultra-tiny sensors like high-resolution cameras and navigation devices

“That’s a mix of attributes akin to what spacecraft require. [And] those are

already built into a smart phone.”

1) Phones

2) Flashlights

3) Compasses

4) Cameras

5) Voice recorders

6) Calculators

7) Watches

8) Alarm clocks

9) Gaming Systems

10) Maps & GPS Systems

Smartphone satellite prototype

Source: Gadgets Arena: 5 Mind Blowing Facts about your smartphone (http://www.gadgets-arena.com/5-mind-blowing-facts-about-your-smartphone/)

Are Digital Companies Cashing In?

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Digital Companies Worth

Digital Trends

Time Magazine Recently Reported

Three US tech companies are

now each officially worth

more than Russia’s entire stock

market:

Digital Companies are in the green

Source: Google joins an elite list of companies, including Exxon Mobile, Microsoft and Apple, Time, Dec 18th, 2014, http://time.com/3639596/google-russian-stock-market/

Apple (AAPL), $654.63

Microsoft (MSFT),

$388.82

Exxon Mobil (XOM),

$377.72

Berkshire Hathaway (BRK-A), $359.68

Google (GOOG), $358.41

Russia, $325.00

$0.00

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

$700.00

Stock Value

Stock Value (in billions) as of Dec 18th, 2014

Technology Innovation Has Spawned Financial Innovation

Banking 30 Years Ago

1985

Online Banking

1992

Early Mobile Banking

1997

Invention of Smart Phone and Tablet

2007-2010

The pace of technical financial innovation within the last 5 years has moved faster than the last 30

Banking Today

Today

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2007

2010

Banking Trends

Where are Customers Interacting with Us

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‘Bricks and Mortar’ VS. ‘Clicks and Twitter’

Some Branch Stats

“~12% of all bank transactions being conducted face-to-face.”-Great Lakes Area Community Bank

“~80% of day-to-day banking transactions being conducted digitally.”

-Top 10 US Bank

“We’ve seen a ~60% reduction in branch traffic over last 10 years.”

-Top 10 US Bank

Why Branch Slowdown?

Banking Trends

Reported US Branch Openings/Closings, Q1 20141

1 - Source: Grand Openings: The State of Marketing New Branches, ,Media Logic, Dec 3, 2014, http://www.medialogic.com/financial-services/blog/grand-openings-state-marketing-new-branches/

“People effectively carry a branch in their pocket.”

-Brian Moynihan, CEO, Bank of America

Our Digitally-Connected Bank Customers are Moving

Towards the Path of Least Resistance


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We’re no Longer Able to Readily Promote, Observe, and Interact with Customers in Traditional Branch Setting

Banking Trends

Why?

Digital Channel has given customers the most expedient path toconduct financial transactions (i.e., Path of Least Resistance)

My Own Experience…

Is this Bad?

While banks can debate this, interactions by today’sbank customer through the digital channel are:

Easier for Customers (Higher Satisfaction)

Cheaper for Bank (Lower Cost of Service)

1 - Source: Will Becoming Smaller Pay Off For Bank of America and JPMorgan Chase & Co?, Motley Fool, http://www.fool.com/investing/general/2014/07/10/will-becoming-smaller-pay-off-for-bank-of-america.aspx

$4.25

$1.25

$0.10

$- $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50

Branch-Teller-Assisted Check Deposit

Branch-ATM Check Deposit

Digital-Mobile Check Deposit

Average Bank Processing Cost for a Check Deposit

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The New Rules of the Road to Reach Customers

Banking Trends


START

CONTINUE

COMPLETE


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98% of people move across digital channeldevices (mobile phone, tablet, online) withinsame day to accomplish specific tasks

- Backbase

Banking Trends

Customers Want to Interact Easily with theirBank Across Their Devices

Goal: Reduce Friction, and Make ProcessSeamless

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Banking Trends

Where are Customers Interacting with Us‘Bricks and Mortar’ VS. ‘Clicks and Twitter’

53% of respondents said they use theircurrent banks’ mobile app at least weekly,and more than 88% of these frequent mobilebanking app users also indicated that theylog into their bank’s online banking websiteat least weekly.

- The Financial Brand

Banking Customers are traversingonline and mobile frequently

Goal: Cater to Each Digital Banking Channel, while Striving for Consistency of User Experience

1 - Mobile vs. Online Banking: It’s Not Either/Or, Consumers Want Both, The Financial Brand, August 12, 2014, http://thefinancialbrand.com/41560/mobile-online-banking-usage/

Device Market Penetration: The ‘Big 2’

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iOS and Android currently own 90%+ of consumer penetration in the mobile and tablet marketplaces, respectively.

Statistics which support this:

Mobile Devices

iOS and Android OS combined for close to 94% of mobile device market share through 2014.

Tablets

iOS and Android combined for 98% of tablet market share in 2012, and these two operation systems are

forecasted to hold 90%+ market share of the tablet market through 2017.

Source1: http://www.comscore.com/Insights/Market-Rankings/comScore-Reports-July-2014-US-Smartphone-Subscriber-Market-ShareSource 2: http://tabtimes.com/resources/the-state-of-the-tablet-market, section: ‘OS market share in tablet unit sales’

Banking Trends

This device market data shows why mobile banking vendors are catering to iOS and Android virtually exclusively at this stage

Are Banks Believing the Digital ‘Hype’?

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Banking Trends

“BBVA will be a software company in the future”

Francisco Gonzalez, Bank Chairman

% of BBVA Bank Employees Focused on Digital Banking

2015 2020 (Estimated)

3% 50%

The New Competitor Landscape (in addition to traditional banks) from BBVA’s perspective:

Source: Mobile Turning BBVA’s Future Into a Software Company, pymnts.com, March 6th, 2015, http://www.pymnts.com/news/2015/mobile-turning-bbvas-future-into-software-company/

Are Banks Believing the Digital ‘Hype’?

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Banking Trends

Top 2015 Priorities for Bank CIOs1

1. Mobile Banking

2. On-Line Banking

…

1 - Source: How Banks Are Allocating Their Tech Budgets for 2015, America Banker, Dec 8, 2014, http://www.americanbanker.com/news/bank-technology/how-banks-are-allocating-their-tech-budgets-for-2015-1071546-1.html

2 – Source: Top 10 Community Bank IT Projects, American Banker, http://www.americanbanker.com/gallery/top-10-community-bank-it-projects-1072933-1.html

Select Top Community IT Projects2

1. Real-Time Electronic Payments - CBW Bank

2. Mobile App Integration with Their ATMs – Wintrust Financial

3. Overhauled mobile and online platforms – Radius Bank

4. Expanded Mobile App Offering to Small Business Loans – C1 Financial

…A Large Midwest Bank’s Lesson…

The Millennials

Customer Demographic Trends

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Source: ‘This year Millennials will overtake Baby Boomers’, January 16th, 2015 (http://www.pewresearch.org/fact-tank/2015/01/16/this-year-Millennials-will-overtake-baby-boomers/)

This year, the “Millennial” generation is projected to surpass the outsized Baby Boom generation as the nation’s largest living generation

By 2015 Millennials will increase in size to 75.3 million and become the biggest group [for the better part of this century]

The Millennials

So Who are the Millennials

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Sources:

1. Top 7 Things Millennials Demand from Brands, Immersive, Feb 19th, 2015, (http://www.immersiveyouthmarketing.com/blog/top-7-things-Millennials-demand-from-brands)

2. Millennial Marketing: New Age of Hospitality Consumers, Richfield Hospitality, Aug 14th, 2014, http://www.richfield.com/blog/?p=339

3. Hiring Millenials-How This Generation can impact your team, SmartTalent, Aug 15th, 2014, http://www.smarttalent.net/tag/tips-for-hiring-Millennials/

4. Millennials Use Mobile Devices More Than Previous Generations, ScreenMedia Daily, Apr 4, 2013, http://screenmediadaily.com/Millennials-use-mobile-devices-more-than-previous-generations/

Caucasian60%

Hispanic20%

Black14%

Asian5%

Other1%

Ages 18-34

(DOB 1981-1997)

Top 5 Things Making Them

Unique

1. Technology Use

2. Intelligence

3. Music & Pop Culture

4. Libertarianism & Tolerance

5. Clothes & Fashion

Also Known As

“The Net Generation”

Beginning to enter their

earning and spending

years

Leverage mobile devices

more than most others…

http://www.immersiveyouthmarketing.com/blog/top-7-things-millennials-demand-from-brands

http://www.richfield.com/blog/?p=339

http://www.smarttalent.net/tag/tips-for-hiring-millennials/

http://screenmediadaily.com/millennials-use-mobile-devices-more-than-previous-generations/

The Millennials

How Different Are Millennials than Previous Generations?

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Gen X Concerts Millennial ConcertsVS

The Millennials

How Different Our Millennials than Previous Generations?

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VS

Gen X Brand Exposure

The Millennials

How Different Our Millennials than Previous Generations?

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Millennial Brand ExposureVS

The Millennials

How Similar Our Millennials than Previous Generations?

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Source: Millennial Marketing: New Age of Hospitality Consumers, Richfield Hospitality, Aug 14th, 2014, http://www.richfield.com/blog/?p=339

Millennials Say Some of the Most Important Things in Their Lives will be:

Important to ThemBeing a Good Parent

Owning a Home

Having a High-Paying Career

Relationship Opportunity for BanksCredit/Loan Products to Support Family Life

Mortgage, HELOCs

Additional Loans/Credit to Fund Lifestyle

http://www.richfield.com/blog/?p=339


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Reaching Customers - Digital Banking 1.0

Reaching Customers with Live and Fresh Information

Live ‘Channels’ within Your Digital Apps

Samples

Live Product & Rate Feeds

News Feeds

Dynamically Controlled Bank Controlled Marketing Ads

Interweaving Messaging and Customer Touch-points in and Around Banking Functionality

You Bank Rates - Charlottesville


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Celebrating The Product and Services You Deploy to Customers


Forever the Mindset: “What’s In it For Them”

Samples (In and Around Launch)

HTML Emails

Prominent Website Shingle (in andaround feature launch)

Updates to LinkedIn and Facebook

Don’t keep a secret the services you’ve worked hard to deploy to your digital channel


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Ratings and Comments Providing Insight Into What Customers Want

App Stores Driving Banking Digital Roadmaps

Meaningful Customer Input

Real-time feedback mechanism from digitalchannel

What is working / what is not (performance,features)

What other services desired

App Store Feedback is driving input into digital roadmaps

Samples: “Where’s my loan?”//“Where’s my tablet app?”// “I wish I could manage my cards…”

Source: ‘CMO of the Week: Michael Lacorazza, of Wells Fargo, on Staying Customer-Centric’, Social Media Today, Feb 26, 2015, http://www.socialmediatoday.com/special-columns/2015-02-26/cmo-week-michael-lacorazza-wells-fargo-staying-customer-centric?utm_content=12561656&utm_medium=social&utm_source=twitter

Source: ‘7 Social Media Trends for Consumers: New Research’, Social Media Examiner, January 16, 2013, http://www.socialmediaexaminer.com/7-social-media-trends-for-consumers-new-research/

Listening to Social Media

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Meaningful Customer Insight

More and more consumers prefer to address issues via social channels vs. calling a contact center

Banks are both tuning in and responding to customers issues / complaints / wants, in real time

As well, consumers are using social media to listen and learn moreabout brands, products, and services they are shopping for

Banks Incorporating ‘Social Care’ as Part of Customer Care Experience

“Our customers live digital, mobile and social lives. We are continuously

investing in social infrastructure to enable us to serve our customers and

connect with them where they are.”

Michael Lacorazza, CMO, Wells Fargo

http://www.socialmediatoday.com/special-columns/2015-02-26/cmo-week-michael-lacorazza-wells-fargo-staying-customer-centric?utm_content=12561656&utm_medium=social&utm_source=twitter

http://www.socialmediaexaminer.com/7-social-media-trends-for-consumers-new-research/

Alerts

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Keep ‘Talking’ to Your Customers

Banking alerts help to increase customer engagement levels

As well, they are helping banks convey to customers:

-Protection: We are watching your money and

keeping it safe

Source: ‘Stay in Touch with your Money’, Brochure on Text Alerts, http://www.comerica.com/personal-finance/Documents/Mobile_Alerts_Handout.pdf

Source: ‘Text Message Marketing Statistics”, Tatango, April 10, 2013, http://www.tatango.com/blog/sms-open-rates-exceed-99/

-Convenience: We will let you know about specific money transactions

that you specify

-Financial Responsibility: We will help you proactively better manage your money

Sample Alerts

Convenience

Low BalanceOverdraftSavings GoalStatement Available

Transaction Monitoring

Large WithdrawalLarge ATM Large Debit Transaction

Identity Protection

Username changesPassword changedAccount lockedAccount unlocked

Suspicious Activity

Card Not PresentForeign Country TransactionPay At the Pump

http://www.comerica.com/personal-finance/Documents/Mobile_Alerts_Handout.pdf

http://www.tatango.com/blog/sms-open-rates-exceed-99/

Understanding Behavior – Digital Enrollment & Activity

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Digital Chanel Adoption Trend Line

79,421

<-- Your Bank

Evaluating Tangible Activity

Check Balance, 1,771,624 , 43%

View Transaction History, 1,362,343

, 33%

View Payees/Make

payments, 465,210 , 11%

Configure Alerts, 318,242 , 8%

Make a Transfer, 114,322 , 3%

Find a Location, 78,522 , 2%

Digital Banking Activity

Baseline of transactions users are conducting

‘1.0’ version of reporting on mobile/tablet:

-Enrollment

-Server Side Committed Transactions

Gaps

Lack of continuity in reporting across online and mobile

Lack of Non-committed activity (RDC abandonment, use of financial tools/calculators)

FIs are Beginning to Define a ‘Digital 2.0’ Strategy


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How do we now differentiate beyond the ‘me too’ to create a ‘Digital 2.0’ experience?

Integrated online and mobile banking is in its relative infancy, and more and more customers are interchanging throughout each as their preferred channels of bank interaction

How do we create more stickiness and brand loyalty via digital?

It’s important to build on a platform that can provide flexibility for future updates

How do we monetize the digital channel?

The future of digital banking is heading towards more advanced trends such as enriched user experience, personalized marketing & customer service, enhanced security, voice recognition and near field communication

There is a growing trend in FIs looking for ways to monetize the

digital channel

Questions we see FIs (Banks, CUs, Credit Card Cos) looking to solve for, now that they have a ‘Digital 1.0’ mobile and online presence in place:


3/11/2015

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Software Architecture Maturity and Responsive Design Approaches Are Making These Unified Digital Banking Platforms A Reality

Emerging Strategies – Digital Banking 2.0

Convergence of Mobile and Online Banking Solutions

Creating Consistency in the Cross-Device User Experience

Benefits

One Platform to Deploy Ads Across the DigitalChannel

Integrated Activity/Response Reporting Across theDigital Channel

Faster Time to Deploy Products and Services Acrossthe Digital Channel

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Mint.com For Your Bank

Platforms are Enabling Banks to Help Their Customer Consolidate their Finances and Provide Financial Planning Tools

Benefits

Creates More Stickiness to Your Bank Site By EnablingThem to Come to ‘One Site’ to Manage TheirFinances

Arm Your Customers with Tools to Help them BeMore Fiscally Responsible

Ability to Create Personal Cross-Sell MarketingCampaigns Based on What Other Products TheyHave (Win-Win)

Sample Financial Planning Tool


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Making More Judicious Use of the Tablet

No longer just ‘An iPhone App running in an iPad’

Benefits

Take Advantage of the Larger Screen RealEstate and Computing Power

Provide More Account Details, MoreProduct and Offer Information

Leverage As Tool to Create AccountOpening Workflows with Ease of FormCompletion and OnBoard Camera(Patriot Act Compliance) Sample iPad Tablet Banking App


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Catering to the Mobile Smartphone vs. the Tablet, based on their respective orientations, continue to reveal more distinct use cases as the use of tablet devices continues to further proliferate in the marketplace. This presents opportunities for digital marketers to take advantage of the lean back orientation of tablet users to be able to promote product and services that would likely not be as highly considered in the ‘lean forward’ orientation of a mobile smart phone user.

‘Lean Back’ Tablet Characteristics ‘Lean Forward’ Smart Phone Characteristics

◊ More Time ◊ Less Time

◊ Stationary Utilization ◊ On-The-Go Utilization

◊ Exploration Oriented ◊ Action Oriented

◊ Higher UX ◊ Lower UX

Making More Judicious Use of the Tablet


How to Better Serve and Originate Customers

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The [digital device] camera, geolocation services, and mobile operator subscriber databases are all being leveraged to improve banking services…”1

Potential Uses:

1 - Oct 30th, 2014 Article

Device Camera

-Take Picture of your Bill to Auto Setup as biller

-Take Picture of ID and Utility Bill for New Customer Account Opening

Geolocation

-Correlating customer location with transaction activity to detect potential fraud

-’Geofencing’ to identify/pre-serve a customer before they walk in the door of the branch

With more digital device capabilities comes more opportunity for innovative ways to serve customers better



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Step 1

Tap the

new voice

login

button

Step 2

Speak your

Voice

passphrase

Step 3

Bank

using voice

comands

A

C

C

E

S

S

Future - Voice-Enabled Mobile Banking

3/11/2015


Prototyped voice banking concept on Monitise mobile platform

Beyond Listening

Becoming part of the conversation

Leading with ‘What’s In it for them’, then tie it to a relevant product or services that could help

Staying relevant and having presence where customers and/or future customers congregate more and more

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Social Media – Contributing to Stay Relevant


Some banks are adopting a posture towards social media contribution of “don’t ‘sell’, just ‘connect’”

Expanding Insight and Tracking across entire digital channel

Capture page Flows across all digital channels (mobile, online, loan origination, etc)

Not Just Transactions, but View Page Flow Activity by user, channel, device, region, etc.

Trend across time as data accumulates

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Digital Insight – Measuring More Comprehensive Activity


Sample New Digital Intelligence

Insight Targeted Action

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Digital Insight – Better Targeting

Location based: High mobile banking use in a specific county business park

Target mobile small business banking banner ads in this geography

Behavior based: Spike in use of used car loan financial calculator

Target mobile auto loan banner ads in mobile channel

Location/Behavior based: High number of ATM searches on a specific zipcode in a specific county

Add an ATM in the highly requested geography

Target mobile ATM ads in this geography


Uncover Missed Opportunities

Ad Placement issues (High Page usage, No Ads)

Ad Creative issues

High Time Spent, Low Click

Low Click, High Apply

Product issues (High Click, Low Apply)

Process issues (High Click, High Apply Begin, Low Apply End)

Strategy issues (High Channel Spend, Low ROI)

Target User issues (Low Click, Apply and Conversion)

Discover New Potential

Trends in channel usage and conversion across time

High conversion on ad resulting in multiple product sales

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Digital Insight – Better Feedback Mechanisms


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Digital Insight – Better Targeting


‘Data is the New Oil in the Digital Economy’

“Data is an immensely, untapped valuable asset”

“Data infrastructure should become a profit center”

“Good data beats opinion”

Source: ‘DATA IS THE NEW OIL OF THE DIGITAL ECONOMY’, Wired, http://www.wired.com/2014/07/data-new-oil-digital-economy/

http://www.wired.com/2014/07/data-new-oil-digital-economy/

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Takeaways

The digital age is here to stay, embrace it to stay competitive

Shifting consumer demographics show us that today’s (and future) customers expect and demand to interact with us via digital channel, so stay tuned to social and digital mediums

Continued features and updates to digital channel show banks ‘interest’ and dedication in serving customers

Consider emerging platforms that combine mobile and digital into one platform, that provides better customer experience, ability for personalized marketing, and lower TCO

Data is the new oil in the digital age, the more you track the more you’ll learn and be able to better market to and serve your customers

Blackstone Technology Group Proprietary and Confidential 3/11/2015


Prepared by: Prepared for:Ken HansPartner, Executive Director

Financial Services

Digital In Banking - Summary Trends - Virginia Bankers Association - March 2015

Documents

Transcript of Digital In Banking - Summary Trends - Virginia Bankers Association - March 2015