Impact of Hyperconnectivity on Retail Banking - BarCampBankParis7
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2012 Financial Breakthroughs Impact of Hyper- Connectivity on Retail Banking 28 January 2012 Paris 176.6.68.33
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Apparently, the Internet has had no impact on retail banking. Branch banks, with a universal banking model, are still the dominant form, and online interfaces are predominantly used by customer of these banks. Pure online banks are only for a limited number of customers, those with multiple bank accounts, a way to access specialized services and are considered as second banks by them. With the advent of hyper-connectivity, the difficult relationship that retail banks have with their customers are about to experience a major change. Instead of being an infrequent (and often unpleasant) source of services, banks can become service providers of a constant, and positive interaction, engaging in a totally renewed relationship.
Transcript of Impact of Hyperconnectivity on Retail Banking - BarCampBankParis7
2012 Financial Breakthroughs
Impact of Hyper-Connectivityon Retail Banking
28 January 2012Paris
176.6.68.33
2012 Financial Breakthroughs
WHAT ARE FINANCIAL BREAKTHROUGHS?
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2012 Financial Breakthroughs
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2012 Financial Breakthroughs
10 YEARS ON AFTER INTERNET BANKING “BIG BANG”
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2012 Financial Breakthroughs
The continuing success of universal banking• Definition: universal bank here as a bank trying to offer all
type of services to its customers (not necessarily to all type of customers)• Sitting on a network of branches and ATMs• Offering an online access
• And a mobile access, even if reluctantly• Always wondering if a customer does not cost more than the
revenue they generate• Terrible understanding of average and marginal costs
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Where is online today in Europe?• In Europe, use of online banking varies by region:• 62%-77% of banking users use online banking in Northern Europe• 35-54% in the core of Europe (France, UK, Germany)• But less than 32% in Southern Europe
• But these online users are on a majority users of the online interface of their branch bank
• And they are mildly interested by what they are offered:• Only half of the online users are interested or very interested by
online banking in Germany
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WHAT IS CRITICAL IN THIS GAME?
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2012 Financial Breakthroughs
Daily Banking• Deposits, payments, management of balance• First Bank & Second Bank• First Bank is the hub of client’s financial life• Second Bank is a bank account specialized for specific services
(savings, investments, credits)• Average cost is much higher than marginal cost, bringing a
constant pressure downward• even if competition pressure is particularly low
• Barriers to entry (legal and capital requirements)• Low interest of customers to use their bargaining power• Complexity of the field
• Only downright collusion can avoid this economic structural imbalance pushing prices downwards 8
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Why this relationship is difficult:• Banks always trying to bring back daily banking revenue back
to average cost• Hold-up fees• Illogical fees
• Customers not perceiving the value of the service• Why should I pay since you use my money for other things?• Why should I pay since other banks would be happy to have me
as a customer?• Why do you have to read evey fine print lines?
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2012 Financial Breakthroughs
Banking Business Models• Universal banking• Propose every type of banking services to their customers• Offer daily banking for a low cost (free for “good” customers),
because they cover the cost with the other services • Specialized banking• Propose a selection of banking services (e.g. savings, invesments,
credits)• Offer a usually limited version of daily banking to increase value
of their proposition
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WHAT HYPER-CONNECTIVITY BRINGS TO THE TABLE?
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What is hyper-connectivity?• 70% of EU-27 users have an Internet access• 19.7% of mobile users access Internet at least once a month in
EU-5 (UK, France, Germany, Spain, Italy).
• It’s no longer information when you need it, but as soon it is relevant.
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Why does it mean a very different relationship?• Customers sees value in information coming from the
provider, it’s part of the service• Customer is not in an “infrequent – high value per encounter”
relationship, but in a “constant – small value per items, but large value in total” relationship
• Customer is no longer dedicating a fixed portion of their time to a specialized activity, but is executing a series of micro-tasks, consuming information, reacting to new elements, initiating new actions
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IMPACT AND STRATEGIES
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What is impacted?• User category• Cash flow neutral user constantly need
to monitor their position
• Daily banking• It is a recurrent and relatively frequent
relationship• It is the highest value banking service• It badly needs to rebuild its relationship
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What strategies for whom?
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Are you an universal bank
Yes No
Create a new line of business for selected segments with high proportion of hyper-connected customers
Are you satisfied being a 2nd bank for your customers
Yes No
Target a selected segment and create a completely new banking relationship
Improve your banking relationship with your hyper-connected customers
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TO GO FURTHER
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Read our whitepaper
If you want to get more information, you can download our new whitepaper:
Impact of Hyper-connectivity on Retail Banking
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2012 Financial Breakthroughs
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Financial BreakthroughsWeb : http://www.finthru.comTwitter : http://twitter.com/FinThru
Frédéric Baud+33 6 4369 [email protected]
Nicolas Guillaume+33 6 1998 [email protected]
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